Abstract
For economic, Social, or foreign direct investment promotion reasons, tax exemptions or incentives are common under tax laws of legal system of different nations. Under Ethiopian stamp duty laws, some areas of foreign investments are exempted from the liability of payment of same; documents that are exempted in accordance with international agreements and conventional treaties approved by Ethiopian government. The objective of this study article is to show the relationship between incentives and foreign direct investment inflows in developing countries and the Ethiopian context. The thesis employs research methodology that follows conceptual and legal analyses and interpretation in a comparative manner. The meaning and nature of investment incentives under Ethiopian investment laws and other jurisdiction, determinant factors driving and influencing the inflows of FDI under developing counties and Ethiopia are discussed. The dominant model of low income countries/developing countries investment incentive i.e. tax exemption and tax holiday’s contribution and effectiveness in the attracting of FDI, and various economics researchers findings on the relationship between income tax incentives and FDI inflows are critically analyzed with the various laws and Ethiopian investment laws. Finally from the findings of different data we can conclude that weak investment climate cannot back up by providing tax incentives to attract FDI in developing countries and Ethiopia. The findings of the study revealed that tax incentive packages that are employed to attract FDI in developing countries are not in a position to accommodate and fulfill the comprehensive driving factors of the FDI and the interest of investors and host states.
Highlights
Given many developing countries including Ethiopia is striving to economic growth through promoting investment
Different text interpretation and factual analysis have been conducted in order to correlate and analyze the relationship between tax incentive and investment flows Structurally, the paper proceeds as follows: Section One gives the necessary introduction to the concept of investment incentives, looking at the main types of incentives used and particular issues that arise in connection with incentives for foreign direct investment (FDI)
Section three is the main body of the paper which aims at showing the relationship between incentives and foreign direct investment inflows in developing countries with particular reference to the Ethiopian cases
Summary
Given many developing countries including Ethiopia is striving to economic growth through promoting investment. The relation between fiscal incentives FDI inflows and the effectiveness of tax incentive in promoting investment in developing countries like Ethiopia are critically analyzed. Different text interpretation and factual analysis have been conducted in order to correlate and analyze the relationship between tax incentive and investment flows Structurally, the paper proceeds as follows: Section One gives the necessary introduction to the concept of investment incentives, looking at the main types of incentives used and particular issues that arise in connection with incentives for foreign direct investment (FDI). Section two looks at the nature of investment incentives and factors influencing foreign direct investment in developing countries and Ethiopia. Section three is the main body of the paper which aims at showing the relationship between incentives and foreign direct investment inflows in developing countries with particular reference to the Ethiopian cases. The last section is the summery; and the writer’s conclusion and recommendation
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