Effects of home country tax reform on FDI inflows to South Korea: A synthetic control method approach
- Authors
- Yang, J.; Kang, Y.
- Issue Date
- Apr-2023
- Publisher
- Elsevier B.V.
- Keywords
- FDI; Synthetic control method; Territorial tax system; Worldwide tax system
- Citation
- Economics Letters, v.225
- Journal Title
- Economics Letters
- Volume
- 225
- URI
- http://scholarworks.bwise.kr/ssu/handle/2018.sw.ssu/43806
- DOI
- 10.1016/j.econlet.2023.111051
- ISSN
- 0165-1765
- Abstract
- To encourage the repatriation of foreign subsidiaries’ profits, Japan and the UK switched from a worldwide tax system to a territorial one in 2009. These home country tax reforms could cause the unintended result of allowing multinational corporations (MNCs) to invest more in low-tax countries due to the possibility of profit shifting. Using the dataset of South Korea and the synthetic control method, we find that the transition to a territorial tax system causes Japan, a country with a relatively high corporate tax, to increase its investment in South Korea. © 2023 Elsevier B.V.
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