Assessing the Importance of Taxation on FDI: Evidence from South-East Asian Developing Countries

This study examines the influence of taxation on FDI using data from South-East Asia. It employs the quantile regression approach with fixed effects that provides a comprehensive view of the tax sensitivity across the FDI distribution. Estimates confirm the significantly negative impact of the bilateral effective average tax rate but its effect is heterogeneous across the distribution. This stresses the importance of understanding the effect of taxation across the distribution rather than only at the mean. Also, the economic significance of the tax is relatively smaller than that of other fundamental factors such as labor quality and governance.