Impact of Tax Incentives on Foreign Direct Investment: Evidence from Africa

Seth Nana Kwame Appiah-Kubi, Karel Malec, Joseph Phiri, Mansoor Maitah (), Zdeňka Gebeltová, Lubos Smutka, Vojtech Blazek, Kamil Maitah and Jitka Sirohi
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Karel Malec: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences in Prague, 165 00 Prague, Czech Republic
Joseph Phiri: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences in Prague, 165 00 Prague, Czech Republic
Zdeňka Gebeltová: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences in Prague, 165 00 Prague, Czech Republic
Vojtech Blazek: Department of Geography, Faculty of Education, The University of South Bohemia in České Budějovice, 371 15 České Budějovice, Czech Republic
Kamil Maitah: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences in Prague, 165 00 Prague, Czech Republic
Jitka Sirohi: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences in Prague, 165 00 Prague, Czech Republic

Sustainability, 2021, vol. 13, issue 15, 1-12

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.

Keywords: foreign direct investment; tax incentives; tax holiday; tax concession; corporate tax rate; panel data (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:13:y:2021:i:15:p:8661-:d:607607

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