Anglia Ruskin Research Online (ARRO)
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Eliminating double taxation and developing double taxation treaties between Thailand and bilateral countries

posted on 2023-08-30, 19:58 authored by Natcha Saramas
With the liberalisation of trade over the last few decades there are increasing number of companies investing in other economies. The developing countries have received significant foreign direct investment (FDI) due to lower cost of labour, intensive production was relocated. Developing countries suffering from under-investment, lower savings ratios and high unemployment consider FDI as a critical means to stimulate economic growth, employment and increase tax revenue. Multinational enterprises operating in many countries have to comply with different taxation policies, this means there is the possibility that where the company is registered and the country where it is operating may tax their revenue twice, resulting in double taxation. This affects company’s financial position and discourages FDI. Thailand has high level of inward FDI and needs to ensure that the incidence of double taxation does not discourage FDI. Therefore, Thailand has actively sort to enter double taxation treaties with countries within the region and internationally. This research examines the literature on FDI, double taxation treaties and to consider its implications for Thailand. Therefore, this empirical research is of high importance to understand the impact of Double Taxation Treaties (DTTs) on countries that use this particular policy to overcome challenges trading between countries. The thesis empirically test FDI flows from, (a) South to South, (b) North to South and (c) ASEAN countries to Thailand to understand the effects of DTTs. The aim of DTT is to minimise the incidence of double taxation. To achieve this goal, firstly, this doctoral thesis investigates how an approved DTT between countries helps to increase FDI. Secondly, the study examines how DTT regulates dividend taxation between Thailand (considered as a host country) and bilateral countries (considered as home countries for international firms). Thirdly, the thesis evaluates how DTT impacts on firms decision participate in FDI in Thailand. This empirical study also undertakes a comparison of under tax credit and tax exemption methods as part of FDI data evaluation. This research also evaluates the different patterns of FDI flows. The study sampled 9 bilateral countries and evaluates applying different method on eliminating double taxation. The research uses one method or a combination of credit or exemption method. The results suggest that for Thailand, from 1970 to 2017, FDI has increased, suggesting that DTTs have successfully increased the level of inwards FDI, resulting in increased economic activities. Thus, showing a strong relationship between DTTs and inward FDI for Thailand. The empirical findings reported in the thesis show a positive relationship for DTTs policy to attract FDI. Furthermore, the qualitative findings derived from the use of in-depth interview are supportive of the quantitative findings. The study concludes that DTTs are efficient and effective tools for countries to encourage intra-country trade as it lowers the cost of transaction. The research highlights the importance of negotiating DTTs for all economies but more so to promote FDI into the region and internationally. The study provides policy direction for the Government of Thailand and academic community to conduct further research into issues DTTs and make trading seamless across regions and internally.



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