Energy and ICT Tax Effects on Foreign Direct Investment in a Low-Income Economy

Abstract

The importance of excellent tax policies in increasing foreign direct investment inflows should be stressed in all growing economies. Foreign direct investment (FDI) is critical to increasing productivity, particularly in developing nations. Taxes emanating from energy related business have also triggered this inquiry due to fumes being contended within the environment and the effect on human existence. Prior researchers have investigated a variety of issues including trade liberalisation, property taxes, market shares, corporate taxation, and rising prices. Fewer researchers have examined the tax implications of energy and information and communication technology (ICT) development as a predictor of FDI in low-income countries. Following the introduction of taxes on energy and ICT activities in Nigeria, foreign investments’ responses have not been tried out in studies and yet the dwindling level has been an issue of policy concern. As a result, this study seeks to fill the gaps by evaluating the effects of energy and ICT taxes on FDI from 2010 to 2020. The data applied for this analysis are obtained from World Bank, Federal Inland Revenue Service (FIRS) and Central Bank of Nigeria. Considering the outcome of this investigation, the paper concludes that the ICT development tax is detrimental to FDI inflows using the econometric approach of regression analysis. The correlational analysis also provides evidence that ICT taxation has a strong negative association with FDI. Other factors, such as trade openness and energy taxes, neither have a substantial relationship nor impact on FDI. The study indicates that improving policies to minimise ICT taxation will benefit the expanding economy by recruiting new foreign investors and retaining those who are currently present in the country