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Tax Incentives and the Flow of Foreign Direct Investment to Non-Oil Sector: Empirical

Author

Listed:
  • Joseph Amuka

    (University of Nigeria Nsukka, Nigeria)

  • Fidelis Ezeudeka

    (Federal Inland Revenue Service Abuja-Nigeria, Nigeria)

Abstract

Foreign Direct Investment has become an important source of bridging the gap between domestic savings and domestic investments in developing countries in the past three decades. In order to increase the flow of foreign direct investment, Nigeria like many other developing countries reformed her tax system in late 1990s to create incentives for the flow of foreign direct investment into the country. She reviewed company income tax downward from 50% in 1980s to 30% in 1999. Similarly, investment allowance was reviewed upward from 25% in 1980s to 95% in 1999. This study investigated whether the incentive policy has brought any significant change in the pattern of flow of foreign direct investment to the non-oil sector. The study adopted a multiple regression model which was transformed into log-log model in the analysis. Regime switch model helped us to evaluate the effectiveness of the policy introduced in late 1999. Both company income tax and investment allowance appeared with the right sign. Result suggests that the tax incentive policy introduced changed the flow of foreign investment to the non-oil sector, showing that the country’s tax incentives can help revive the ailing non-oil sector.

Suggested Citation

  • Joseph Amuka & Fidelis Ezeudeka, 2017. "Tax Incentives and the Flow of Foreign Direct Investment to Non-Oil Sector: Empirical," Asian Journal of Social Sciences and Management Studies, Asian Online Journal Publishing Group, vol. 4(1), pages 57-64.
  • Handle: RePEc:aoj:ajssms:2017:p:57-64
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    References listed on IDEAS

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    1. Kelly D. Edmiston & Shannon Mudd & Neven T. Valev, 2004. "Incentive Targeting, Influence Peddling, and Foreign Direct Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(5), pages 647-660, September.
    2. VINTILĂ Denisia, 2010. "Foreign Direct Investment Theories: An Overview of the Main FDI Theories," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 02, June.
    3. Hans Christiansen & Charles P. Oman & Andrew Charlton, 2003. "Incentives-based Competition for Foreign Direct Investment: The Case of Brazil," OECD Working Papers on International Investment 2003/1, OECD Publishing.
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    Cited by:

    1. Raphael S. Etim & Mfon S. Jeremiah & Ofonime O. Jeremiah, 2019. "Attracting Foreign Direct Investment (FDI) In Nigeria through Effective Tax Policy Incentives," International Journal of Applied Economics, Finance and Accounting, Online Academic Press, vol. 4(2), pages 36-44.

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