Title: CORPORATE TAXES AND FOREIGN DIRECT INVESTMENTS IN NIGERIA
Authors:
Ordu, Chile Umezurike, Ph.D, Ogbonna, Felix Ibezim, Ph.D and David, Dokubo Kennedy, Ph.D
Abstract:
The study aims to provide invaluable insights into how corporate tax policies impact the inflows of foreign direct and foreign portfolio investments. The study empirically explored the complex relationship between the various forms of corporate taxes, specifically, companies income tax and value added tax and their impact on foreign investments represented by foreign direct and foreign portfolio investments from the year 2000-2022 using an Ex-Post Facto design. The population of this study relates to the Nigeria economy only and the annual time series secondary data were sourced and obtained from relevant literature including the Central Bank of Nigeria (CBN) Statistical Bulletin, the National Bureau of Statistics (NBS) publications, and the annual reports of the Federal Inland Revenue Service (FIRS) among others. Descriptive and inferential statistics were used for the primary and secondary analysis to test the research hypotheses. The Auto Regressive Distributed Lag (ARDL) model was employed for the multivariate analysis to determine the short-run and long run relationship between the variables under study. The findings from this study indicated that corporate taxes (CIT and VAT) have significant impacts on foreign investments in the short – run and long-run. The findings of this study contradicts previous studies or results as we found positive impact of VAT on FDI but negative impact of VAT on FPI in the long run. Based on our findings, higher companies income tax and value added tax affect the propensity to invest in Nigeria. Consequently, we recommended the optimization of tax policies to the Nigerian government by lowering corporate tax rates in order to attract foreign investments. It is also recommended by this study that the government should consider the harmonization of Value Added Tax Policy to reduce the burdens on business thereby making the Nigerian investment climate predictable and attractive to foreign investors.
Keywords: Corporate tax, foreign Direct investment, foreign Fortfolio, Petroleum profit tax.
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