PARIS: Global foreign direct investment (FDI) flows fell 18 percent in 2017 to $1.41 trillion, due partly to a sharp decline in flows into the United States as the prospect of tax reform reduced the incentive to engage in financial and corporate restructuring.
FDI movements in the fourth quarter reached their lowest since 2013, including flows into the European Union which hit negative levels driven by large net disinvestments recorded in Ireland and Luxembourg.
"The United States remained the largest source of FDI worldwide by a long stretch, followed by Japan, China, the United Kingdom, Germany and Canada," the OECD said in a statement.
FDI flows into the United States dropped to $287 billion after reaching more than $450 billion in 2015 and 2016. US FDI outflows rose 21 percent to $363 billion.
China, after being a net outward investor for the first time in 2016, returned to being a net inward investor last year.
Britain, which is negotiating divorce terms and a future trading relationship with the European Union, recorded FDI inflows of $15 billion, its lowest since 2005 and a dramatic fall from the $196 billion recoded in 2016 -- a year skewed by Anheuser-Busch InBev acquiring SABMiller.
US President Donald Trump in December signed into a law a sweeping tax bill, the biggest overhaul of the US tax code for more than 30 years.
It included cutting corporate income tax to 21 percent from 35 percent and a new territorial system that exempts US corporations from US taxes on most future profits, ending a system of taxing profits of all US-based corporations no matter where they are earned.
The tax reform also set a one-time mandatory tax of eight percent on illiquid assets and 15.5 percent on cash and cash equivalents for about $2.6 trillion in US business profits held overseas.
"Looking ahead, this is likely to reduce FDI flows in 2018 as US companies repatriate cash due to the one-time tax on undistributed foreign earnings," the OECD said.
"The longer term effects of the tax reform are more difficult to predict," it added.
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