Impact of Tax Incentives on Foreign Direct Investment: Evidence from Africa

Appiah-Kubi, Seth Nana Kwame; Phiri, Joseph; Maitah, Mansoor; Gebeltová, Zdeňka; Smutka, Ĺuboš; Blažek, Vojtěch; Malec, Karel; Sirohi, Jitka

doi:10.3390/su13158661

Cited by 21 publications

(17 citation statements)

References 47 publications

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“…Moreover, Zulaecha & Murtanto (2019) noted that firms controlled by multilateral and bilateral corporation significantly contributes to sustainable performance in Indonesia. Appiah-Kubi et al (2021) examined the relationship between tax incentives and the inflow of foreign direct investment in 40 African countries for the period of 2000-2018. Employing a robust random effect model the study found that foreign direct investment responds positively to lower corporate tax.…”

Section: Literature Reviewmentioning

confidence: 99%

Choice of location for Foreign Direct Investment by multinational corporations: Do tax burden matter?

Bassey

Amobi²,

Okorie³

2022

IJFAM

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Purpose: This paper investigated the effect of the tax burden on the inflow of FDI into the continent. The study employed a panel data set of 48 SSA countries covering a period of 2009 to 2018. Research methodology: In other to account for the endogeneity problems associated with most financial data, we employed a dynamic panel two-step-system-GMM. Results: The result indicates that tax burden is a negative determinant of the inflow of FDI. In other words, multinational corporations attach a significant premium to countries with low tax burdens than those with a high tax burden. Similarly, an increase in the mobility of labour is a negative determinant of the inflow of FDI into the continent. All the economic and financial freedom indices included in the model have a positive and significant influence on the inflow of FDI into the continent. A sustainable tax policy that will lessen the tax burden on foreign investors should be formulated to enhance the inflow of FDI into the continent. Limitations: This study employed Dynamic System GMM which can produce variant results depending on the choice of instrument. Contribution: This study provides insight on the role of fiscal policy particularly taxation in explaining the inflow of FDI. Policymakers, multinational corporations, and other players in the global FDI market will appreciate the influence that tax exerts on FDI inflow. Keywords: 1. FDI 2. Financial freedom 3. Investment freedom 4. Labour freedom 5. Monetary freedom 6. Tax burden

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Section: Literature Reviewmentioning

confidence: 99%

Choice of location for Foreign Direct Investment by multinational corporations: Do tax burden matter?

Bassey

Amobi²,

Okorie³

2022

IJFAM

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“…Even though taxes have implications for government revenue, tax policy and its administration are a key part of country's private sector development strategy (Mawejje & Sebudde, 2019). Most empirical literature on the effect of tax on the private sector focuses on the relationship between tax incentives and FDI (Appiah-Kubi et al, 2021;Hsu et al, 2019;Mosquera Valderrama, 2020). A study by Klemm & Parys (2012) found that a decrease of 10% in corporate tax is associated with an increase in FDI between 0.33 and 4.5% of GDP.…”

Section: Literature Reviewmentioning

confidence: 99%

Private Sector Development Analysis in Post-Conflict Kurdistan Region of Iraq

Muhamad

2022

UKHJSS

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Private sector development (PSD) has been a vital part of the Kurdistan Regional Government (KRG)’s economic development policy since the very beginning of the development of the region. The objective of this paper is to critically analyse private sector development in post-conflict Kurdistan Region of Iraq (KRI). A qualitative method of critical review to the development of private sector in the use of official documents is used from 2006 to 2016. It is concluded that because of the key challenges facing the private sector and a weak synergy between private and public sector, the KRG polices, and the experience of private sector were not effective in favour of the economy of Kurdistan. This was possibly due to the failure of the KRG in monitoring and evaluating the impact of those polices, political consideration in the way of doing business, internal conflict, and poor institutional system of the region. Public policy implication of this study is that there must be a close tied up of PSD programme to governance and interventions of peacebuilding. Most importantly, promoting the rule of law in the way that political actors should have neither influence on legal system nor on businesses.

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“…Authors [5], using corporate tax rate, withholding tax, tax holiday and tax concessions as proxies of tax incentives and Random Effect econometric model as a tool of analysis, the study analysed a panel data covering the period 2000-2018 from forty African economies. It was found that lower corporate tax (β=-0.784; t=-0.69; p=0.011) significantly affect FDI.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Authors [5] investigated the implication of taxation in FDI inflows in Pakistan. The study used Time Series data covering the period from 1985 to 2020 obtained from the World Development Indicator and the Economic Survey of Pakistan.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of Tax Incentives on Foreign Direct Investment Flow in Nigeria

Ibrahim

Garba

Muhammad

et al. 2022

PoS

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The growing pace of the globalisation process has triggered economic development, especially among developing nations. One of the immediate responses to this phenomenon is the increasing trend of Foreign Direct Investment flows among countries driven by some factors. This paper aimed at determining the impact of tax incentives (tax holiday and custom duty exemption) on Foreign Direct Investment inflow into Nigeria over the period 2008-2018. Using secondary data obtained from the Nigerian Investment Promotion Commission, Central Bank of Nigeria and Nigerian Customs Service, Driscoll-Kraay Standard Errors regression analysis was used via STATA version 14 to test the research hypothesis. The study's findings revealed that tax incentive has a positive and significant impact on Foreign Direct Investment inflow. Specifically, tax holiday has significant positive effect on FDI at 5% level of significance (β=0.1578; t=3.99; p<0.05) while custom duties exemption reported significant positive effect on FDI at 1% level of significance (β=0.2436; t=5.61; p<0.01). It is recommended that the government maintain and strengthen its policies on tax holidays and customs duties exemption to improve Foreign Direct Investment inflow, thereby developing the national economy.

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Impact of Tax Incentives on Foreign Direct Investment: Evidence from Africa

Cited by 21 publications

References 47 publications

Choice of location for Foreign Direct Investment by multinational corporations: Do tax burden matter?

Choice of location for Foreign Direct Investment by multinational corporations: Do tax burden matter?

Private Sector Development Analysis in Post-Conflict Kurdistan Region of Iraq

Impact of Tax Incentives on Foreign Direct Investment Flow in Nigeria

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