International tax competition and foreign direct investment in the Asia-Pacific region

What is it about?

By using a panel dataset from 28 economies in the Asia-Pacific region, our results from system GMM estimations confirm the connection between preferential tax strategy and FDI inflows. More specifically, statutory corporate income tax (CIT) has a significant negative impact on FDI inflows. Therefore, CIT is an effective indicator to observe international tax competition. The effects of other confounding factors on FDI inflows are also examined (e.g., transportation and information connectivity, trade openness, skilled and cheap labor, public governance, and the level of public goods provision). The findings of the present study have important implications for future research and tax governance.

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Why is it important?

The present research uses rich data on statutory CIT and other economic and public governance factors to investigate the relationship between tax competition and FDI inflows in the Asia–Pacific region. The findings add important supplements to the nuanced understanding of the political-economic dynamics in this region, especially when cut-throat tax competition, trade tensions, and stagnant economic growth have been key challenges for global economies.

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