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%