Do Double Taxation Avoidance Agreements Attract Foreign Direct Investment? The Case of Nepal

Countries sign double taxation avoidance agreements (DTAs) to promote bilateral economic activities, and facilitate cross-border investment and capital transfer. Given the importance that countries place on DTAs to promote economic relations, this research aims to determine the impact of DTAs on foreign direct investment (FDI) in Nepal from 1990 to 2020. The research uses qualitative and quantitative approaches for the assessment.

The paper estimates the average treatment effect of treatment using synthetic difference-in-difference (SDID) with a staggered adoption design. The design is appropriate for two key features in the given setting: (i) tax treaties are signed and come into effect at different times (years); and (ii) many countries without DTAs with Nepal have invested in the country. This can be used to construct the appropriate counterfactuals.