The Effects of FATCA on U.S. Investment Abroad: An Empirical Analysis of Changes in Investment Positions Using Fixed Effects

摘要

This article is based on a study conducted to investigate whether the Foreign Account Tax Compliance Act's (FATCA) withholding tax on international transactions to non-compliant foreign financial institutions (FFIs) has any effect on U.S. investment positions. The study's goal was to evaluate FATCA as a possible barrier to U.S. investment abroad and examine whether the allocation of investment positions has changed. The dataset obtained was panel data consisting of investment positions between 2010 and 2015; the statistical method applied in estimating the impact was fixed effects models with both combined as well as separated time and individual fixed effects. The evidence points toward an increase of between 5.8 and 9 percent in investment among jurisdictions with IGAs in force, when including the most important control variables. This positive impact is primarily thought to be caused by the withholding tax affecting monetary payments to FFIs in other jurisdictions. A positive correlation between FATCA and investment would create incentives for non-participating jurisdictions to seek negotiations for intergovernmental agreements (IGAs) with the U.S.