Tax Policy and Foreign Direct Investment: A Regime Change Analysis

Onome Christopher Edo (), PhD Anthony Okafor and Akhigbodemhe Emmanuel Justice
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Onome Christopher Edo: Department of Accounting, University of Benin, Nigeria.
PhD Anthony Okafor: Department of Finance, University of Louisville, Kentucky
Akhigbodemhe Emmanuel Justice: Department of Economics, University of Benin, Nigeria

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Abstract: Objective - Tax policies play significant role in the direction of foreign direct investments. We investigate the proposition that tax policies enacted by military and democratic regimes differ on the influence the foreign direct investments. Methodology � Our hypotheses are tested using the error correction model as we compare the impact of tax policies on flow foreign direct investments in Nigeria between two dispensations: military rule from 1983 to 1999 and democratic rule from 1999 to 2017. Panel data between 1983 and 2017 were obtained from the databases of the World Bank, Central Bank of Nigeria and the Federal Inland Revenue Services. The explanatory variables include company income tax, value added tax, tertiary education tax and customs and exercise duties. Findings � The study reveals that tax variables during the military regime exerted more explanatory power of 79% compared to the civilian administration of 66% with respect to the impact of corporate taxes on FDI. The effect of company income tax on FDI was more pronounced during the military regime than in the civilian regime. FDI had a higher degree of convergence during the military regime compared to civilian rule, and this is vital for policy assessments and comparison. Novelty � We bring to light new evidences on the effects of taxes polices on FDI. Type of Paper - Empirical

Keywords: Corporate taxes; Tax Policies; Foreign Direct Investments; Error Correction Model; Military regime; Civilian regime. (search for similar items in EconPapers)
JEL-codes: E22 F21 H2 P33 (search for similar items in EconPapers)
Pages: 15
Date: 2020-12-31
New Economics Papers: this item is included in nep-cwa, nep-int, nep-mac and nep-pub
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Citations: View citations in EconPapers (2)

Published in Journal of Finance and Banking Review, Volume 5, Issue 3

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Persistent link: https://EconPapers.repec.org/RePEc:gtr:gatrjs:jfbr176

DOI: 10.35609/jfbr.2020.5.3(3)

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