Abstract
African countries have faced competition and several challenges to attract foreign direct investment given the role that FDIs play in the development process. Several efforts made have been futile because of numerous factors that play against the business environment for foreign investments. Our paper analyses the influence of tax incentives on foreign direct investment in African economies based on data from 2000–2018. We utilized panel data on forty (40) African countries and an econometric model of four proxies of tax incentives, after controlling other variables, with robust Random Effect as our discussion estimator. Our results revealed that FDI responds to lower corporate income tax (CTR). Furthermore, foreign direct investment predominates in African economies with longer tax holidays and withholding tax. However, tax concession is insignificant to the inflows of FDIs in Africa. Summarizing, our results recommend that without proper restructuring of the tax incentives to deal with policy lapses by the governments of Africa, achieving the four main goals, i.e., poverty eradication, sustainable growth and development, African integration in the competitive global economy, and women empowerment, will be hindered.
Highlights
Accepted: 30 July 2021What are the motivational factors that influence foreign direct investments in a nation?For several developing countries within Africa, which are not an exception, there are significant economic benefits
The objective of our paper is to investigate how effective tax incentives influence the inflows of foreign direct investments in Africa within the period 2000–2018
The data for foreign direct investment (FDI) as the dependent variable were sourced from the World Development Indicators (WDI), a data set from the World Bank
Summary
What are the motivational factors that influence foreign direct investments in a nation?. For several developing countries within Africa, which are not an exception, there are significant economic benefits. Such nations have managed to utilize the global investment pool and drastically improved their standard of living. The foreign direct investment decision is a progressively mainstream research interest. According to Appiah-Kubi et al [10], there have been several recommendations for Africa countries to lure remarkable inflows of foreign direct investment to enhance infrastructural development by the United Nations Sustainable Development
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