International Journal of Accounting Research

Abstract

Effect of Tax on Non-Oil Foreign Direct Investment (FDI): Evidence from Nigeria

Ganiyu Adisa Tijani*

The quest for increase of inflows of foreign capital investment among different countries of the world has a new dimension. Tax has become a vital instrument used by some countries to influence the flows of capital to their countries. Based on this, this study investigated the impact of tax on foreign direct investment in Nigeria. The specific objectives are to examine the effect of company income tax and education tax on the foreign direct investment inflows to Nigeria. The study used time series data covering 1986-2017 obtained from central bank of Nigeria and National Bureau of Statistics (NBS). Fully-modified cointegrating regression analysis technique was employed for the study to test for the relationships that exist between tax and foreign direct investment in Nigeria. The findings revealed that company income tax were significantly negative in influencing foreign direct investment into Nigeria with p-values of (0.0456); infrastructural development was found to have a positive significant relationship with the inflows of foreign direct investment to Nigeria (p-value of 0.0017). Non-significant relationship was found between educational tax and foreign direct investment inflows to Nigeria. The results suggested the need to ensure a sound fiscal policy that will ensure proper management of her tax policy. The study concludes that tax system operated in Nigeria is pivotal to the inflows of foreign direct investment to Nigeria. Hence, it was recommended that Nigerian government needs to come up with friendly tax rate in the form of company income tax rate to induce more foreign investors with long lasting interest into the economy.

Published Date: 2024-07-29; Received Date: 2020-03-23