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Source: Asia Development Bank

Changes to United States (US) corporate tax rules effective in 2018 provided important incentives for US corporations working abroad to repatriate profits back to the US. This paper examines how sensitive US foreign investors are to corporate tax changes, looking at greenfield foreign direct investment from the US into productive sectors in developing Asia. Using panel data at the country and sector level spanning almost 15 years, this paper shows that the corporate income tax rate does not affect the US’ inward foreign direct investment once market size, costs, openness, and the business environment are taken into account.

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