Tax Rates and Foreign Direct Investments in Sub-Sahara Africa,

Abstract

The relevance of foreign direct investments (FDIs) in sub-Sahara Africa has been more overstated in recent years. The benefits it attracts cannot be quantified as it generally boosts a nation’s economy and standard of living. The volume of the influx of Foreign Direct Investments is, however, dependent on various factors. One of the numerous considerable factors includes Tax rates. Tax rates are the percentages at which an individual or corporation is taxed. The rates of tax can either positively or negatively affect the inflow of Foreign Direct Investments (FDIs) in a country. This study is carried out to examine the relationship and effect of tax rates with/on Foreign Direct Investments (FDIs), finding out if Value Added Tax is adversely related with FDI, if Personal Income Tax and Corporate Income Tax are significantly associated with FDI, and if Tax rates are major determinants of FDI in sub-Sahara Africa. Data was obtained from UNCTAD reports, World Bank reports, and Trading Economics reports. Multiple regression and correlation analysis were used to carry out analysis. From the analysis, it was discovered that Value Added Tax has an adverse and significant relationship with FDIs, Personal Income Tax rates has a negative and insignificant relationship with FDIs, and Corporate Income Tax rates has a positive but insignificant relationship with FDIs. It was also derived from the analysis that rates of tax do not majorly and significantly affect the inflows of Foreign Direct Investments (FDIs). It is recommended that the governments and tax regulatory bodies of every country should emphasize the importance of the tax rates in attracting foreign direct investments and foreign investors should also support tax rates by considering it more when investing in other countries.

Keywords: Africa, Foreign Direct Investment, Taxation

Article Review Status: Published

Pages: 1-15 (Download PDF)

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