9
Located in the United States Ow ned by United States MNEs ~ Almost 50% of global FDI stock affected by tax reforms ~ + • • • • •
Located in the United
States
Ow ned by United
States MNEs
~
Almost 50% of global FDI stock affected by
tax reforms
~
+
•
•
•
•
•
Investment
climate
International
tax structures
i. Corporate income tax
reduction
Key measures
ii. Investment expensing
iii. Cap on interest
deductability
iv. Territorial tax system
v. Mandatory deemed
repatriation
vi. Anti-avoidance
measures
▪ Increases attractiveness of the US as an
investment destination.
Potential impact on FDI
▪ Reduces investment costs, increasing
the attractriveness of the US
▪ Reduces debt financing options and
could decrease intra-firm loans. Could
have a negative impact on highly
leveraged cross-border M&A deals.
▪ Reduces the need for high levels of
retained earnings overseas. Could lead
to re-routing of US outward FDI stocks.
▪ Immediate impact on US outward FDI
stocks; negative outflows as MNEs
repatriate cash.
▪ Could lead to re-routing of US outward
FDI stocks. Differentiated impact by
sector/industry; e.g. stronger impact on
IP-intense sectors.
▪ Could provide a stimulus to US domestic
capex (stronger for domestic firms).
Potential impact on Capex
▪ Likely to boost US domestic capex,
including by MNEs.
▪ Could dampen capex effect where it leads
to higher cost of capital. Negatively affects
highly leveraged investments, in particular
PE investments.
▪ Limited impact, as the negative effect of
the high tax rate was already off-set by
tax-efficient corporate structures.
▪ By itself, limited real impact from the
repatriation of overseas cash – in
combination with lower CIT and expensing
it may boost capex by MNEs.
▪ Limited real impact. May affect
international corporate structures in IP-
intense sectors (e.g. negative impact on
overseas R&D) and financial sectors.
Low impact High impact
OECD average
$ bill ions
The 2005 Homeland Investment Act caused 2/3 of overseasretained earnings to be repatriated
Funds available for repatriation nowalmost 7 times larger
$ bill ions
75% of total United States outward FDI stock
2010 2011 2012 2013 2014 2015
+250%
2010 2011 2012 2013 2014 2015
+50%
385
325
271
221
168
110
411 398 369 355
322 281
ICT MNEs
Other MNEs
Trend in unremitted foreign earnings
Billion US $Share of total
foreign earnings
Ratio to foreign
tangible assets
Effective tax
rate
2015
62%
22%
7.8
2.1
19%
27%
