Company Income Tax and Investment Decisions: A Behavioural Approach

A, Oloidi G.

doi:10.9790/487x-16751119

Cited by 3 publications

(1 citation statement)

References 1 publication

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“…However, in the case of Zimbabwe the tax revenues are mainly used for non-productive expenditure such as salaries (Muzurura and Sikwila, 2018), leading to lower investment growth, lower productivity, and lower return on investments. While taxes subsequently affect the return on investments there are other factors that may distort the value of return on investments such as the rate of return and the economic depreciation (Oloidi, 2014)…”

Section: Influence Of Tax On Sales Volumesmentioning

confidence: 99%

Policy Contradictions and Policy Dilemma: A Case of Intermediary Money Transfer Tax (IMTT) on Business Performance in the Engineering Sector in Zimbabwe

Nyoni

Jaravaza

Mare

et al. 2021

BER

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The use of tax policies to address macro-economic challenges has often led to serious other macro-economic challenges for developing countries. The purpose of this paper is to illustrate macro-economic policy dilemmas that affect developing countries when they implement tax policies to address macroeconomic challenges. The objective of the study was to examine how the 2% Intermediary Money Transfer Tax (MTT) introduced to raise financial resources to grow the economy affected performance of companies in the engineering sector. The study was guided by the pragmatism research philosophy, used explanatory research design and a mixed research approach. Data was collected from companies in the metal fabrication and machine/equipment sub-sectors of the engineering sector. A total of 68 companies were used. The paper shows that a tax policy adopted by Zimbabwe to raise revenues for supporting economic growth and addressing several economic challenges such as poverty, unemployment and negative economic growth generated other macro-economic challenges such as declining performance of companies in the Engineering sector. Results from the study showed that 2% IMTT had a negative an influence on business performance of companies in the engineering sector. The tax reduced profit margins, sales, and competitiveness. Conclusions from the study were that adoption of tax policies by governments, to achieve increased revenue and growth of the economy may, in the process, negatively affect some sectors of the economy. It was therefore recommended that the government analyse potential contradictions and dilemmas before implementing tax policies. Further studies of the influence of IMTT on other sectors like the small scale and informal sectors that are usually hit the hardest by government policies is recommended.

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Section: Influence Of Tax On Sales Volumesmentioning

confidence: 99%

Policy Contradictions and Policy Dilemma: A Case of Intermediary Money Transfer Tax (IMTT) on Business Performance in the Engineering Sector in Zimbabwe

Nyoni

Jaravaza

Mare

et al. 2021

BER

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Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

Chindengwike

2022

JGE

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The study's overarching goal is to assess the influence of Value Added Tax (VAT) revenue on private domestic investment in emerging countries. The study used a time series research design, and it is a case study of one country, Tanzania. Annual time series data from 1998 to 2020 were used in the study. The data on tax income (VAT) is taken from the Tanzania Revenue Authority website and the Bank of Tanzania, while the data on private domestic investment as Gross fixed capital formation of the private sector as a percentage of GDP is obtained from the World Bank. Following the first tests for heteroscedasticity, multi-collinearity, unit roots, lag length selection, and co-integrating vectors. The long-run and short-run correlations were then computed. The findings demonstrated that in the long run, value added tax is negatively associated to private domestic investment. The analysis showed a negative association between the degree of investment and the value added tax parameter estimates. Even though value added tax generates government revenue, increasing it encourages tax evasion and leads to high prices of goods, putting the burden on low-income earners, reducing disposable income and distorting saving and private domestic investment. The study recommends that governments reduce VAT rates, simplify their tax regimes, address any tax administrative issues, and plug all gaps for tax evasion in order to increase revenue generation and attract private investments. For example, the government should improve an appropriate tax system and implement progressive tax reforms to attract private investors. As the study's findings demonstrated that value added tax has a negative long-term impact on investment, a greater value added tax levied causes higher corporate costs. Governments must also lower VAT rates, simplify their tax regimes, address any tax administrative issues, and close any gaps for tax evasion in order to increase revenue generation and attract private investment. For example, the government should improve an appropriate tax system and implement progressive tax reforms to attract private investors. As the study's findings demonstrated that value added tax has a negative long-term impact on investment, a greater value added tax levied causes higher corporate costs.

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Assessing the Effects of Corporate Taxation on the Investment Policy of Manufacturing Firms in Nigeria

Akinleye

Olarewaju

Fajuyagbe

2019

Folia Oeconomica Stetinensia

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Research Background: The complexities of taxes in business have a tendency of endangering investment decisions at every point in time, if such complexities are not strategically managed. Purpose: This study therefore assesses the effect of corporate taxation on the investment policy of quoted manufacturing firms in Nigeria. Research Methodology: Secondary data sourced from annual reports of the selected firms were analysed using descriptive and inferential statistics. Specifically, static panel least square regression techniques were used. Result: The results of the study revealed that company income tax (CIT) is positively related to the investment decision of the quoted manufacturing firm (INV), and thus enhances the investment of the quoted manufacturing firm (INV) in Nigeria. The probability value revealed that company income tax (CIT) had a statistical significant correlation with the investment of the quoted manufacturing firm in Nigeria. This implies that higher corporate income taxes are associated with lower investment in manufacturing firms. Novelty: This study digressed from examining the effects of corporate tax on financial performance as that was the major focused area in this context. However, this study assessed its effect on investment decisions. Hence, this study was able to recommend that the Nigerian government should encourage and enhance manufacturing investment decision by designing an appropriate corporate income tax policy. An investment decision that is fostered on new capital, encourages the implementation of new production techniques and thus should be engineered for the development of manufacturing firms.

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Company Income Tax and Investment Decisions: A Behavioural Approach

Cited by 3 publications

References 1 publication

Policy Contradictions and Policy Dilemma: A Case of Intermediary Money Transfer Tax (IMTT) on Business Performance in the Engineering Sector in Zimbabwe

Policy Contradictions and Policy Dilemma: A Case of Intermediary Money Transfer Tax (IMTT) on Business Performance in the Engineering Sector in Zimbabwe

Influence of Value Added Tax Revenue on Private Domestic Investment in Developing Countries

Assessing the Effects of Corporate Taxation on the Investment Policy of Manufacturing Firms in Nigeria

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