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Impacts of New International Tax System on Multinational Firms' FDI

Sangjun Yea ()
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Sangjun Yea: KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP), Postal: [30147] Building C, Sejong National Research Complex, 370, Sicheong-daero, Sejong-si, Korea,

No 22-17, World Economy Brief from Korea Institute for International Economic Policy

Abstract: In this study, I present a theoretical model to quantitatively assess the economics impact of Pillar 1 and Pillar 2, especially focusing on the changes in the FDI patterns of multinational enterprises (MNEs). Pillar 1 offsets the incentives of MNEs' profits-shifting for tax-planning purposes, thereby reducing the inbound FDI into the countries with low corporate income tax rates. Pillar 2 burdens MNEs with 'top-up' taxes attributed from the subsidiaries in low tax countries. As the profits after tax (PAT) of MNEs shrink at the global level, innovation and R&D investment for new products will decrease, and as a result, global FDI flows will hamper.

Keywords: International Tax System; Multinational Firms; FDI (search for similar items in EconPapers)
Pages: 9 pages
Date: 2022-04-28
New Economics Papers: this item is included in nep-acc, nep-int, nep-pbe and nep-pub
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