TAX RATES AND FOREIGN DIRECT INVESTMENTS IN SUB-SAHARA AFRICA
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The relevance of foreign direct investments (FDIs) in sub-Sahara Africa has been more
overstated in recent years. The benefits it attracts cannot be quantified as it generally boosts a nation’s
economy and standard of living. The volume of the influx of Foreign Direct Investments is, however,
dependent on various factors. One of the numerous considerable factors includes Tax rates. Tax rates
are the percentages at which an individual or corporation is taxed. The rates of tax can either
positively or negatively affect the inflow of Foreign Direct Investments (FDIs) in a country. This study
is carried out to examine the relationship and effect of tax rates with/on Foreign Direct Investments
(FDIs), finding out if Value Added Tax is adversely related with FDI, if Personal Income Tax and
Corporate Income Tax are significantly associated with FDI, and if Tax rates are major determinants
of FDI in sub-Sahara Africa. Data was obtained from UNCTAD reports, World Bank reports, and
Trading Economics reports. Multiple regression and correlation analysis were used to carry out
analysis. From the analysis, it was discovered that Value Added Tax has an adverse and significant
relationship with FDIs, Personal Income Tax rates has a negative and insignificant relationship with
FDIs, and Corporate Income Tax rates has a positive but insignificant relationship with FDIs. It was
also derived from the analysis that rates of tax do not majorly and significantly affect the inflows of
Foreign Direct Investments (FDIs). It is recommended that the governments and tax regulatory bodies
of every country should emphasize the importance of the tax rates in attracting foreign direct
investments and foreign investors should also support tax rates by considering it more when investing
in other countries.
Keywords
H Social Sciences (General), HF5601 Accounting