Volume 6, Issue 4, August 2017, Page: 91-101
Multiplicity of Taxes and Foreign Direct Investment: A Relational Analysis of Nigerian Tax Environment
Akinwunmi Abiodun Jelil, Department of Accounting, School of Management Sciences, Babcock University, Ilishan Remo, Nigeria
Olotu Ayooluwa Eunice, Department of Accounting, School of Management Sciences, Babcock University, Ilishan Remo, Nigeria
Adegbie Folajimi Festus, Department of Accounting, School of Management Sciences, Babcock University, Ilishan Remo, Nigeria
Received: May 11, 2017;       Accepted: May 25, 2017;       Published: Jul. 12, 2017
DOI: 10.11648/j.ss.20170604.11      View  1251      Downloads  60
Governments of different countries have the constitutional backing to impose a plethora of taxes on both local and foreign entities doing businesses in their countries. It is common for a country most especially the developing one like Nigeria to impose all of these taxes instantaneously. Obviously, these taxes have important implications for investment and economic activity, including Foreign Direct Investment. The emphasis of this study is to examine the relationship between multiple taxes and Foreign Direct Investment inflow in Nigeria for the period 1996 to 2015. The study adopted the ex-post facto research design. Secondary data used was collected from Central Bank of Nigeria Statistical bulletins, National bureau of statistics publications and Central Bank of Nigeria Annual Reports. Descriptive analytical procedure and inferential statistics were employed. The descriptive statistics was used in explaining the characteristics of the variables while inferential statistics involved the use of multiple regressions for analysis and time series was used for estimation. From the findings, it is noted that there is an inverse relationship between multiple taxes and Foreign Direct Investment (FDI) in Nigeria; which implies that the higher the taxes, the less the FDI inflows into the country. The given high value of the R2 (0.858333) implies that a 85.83% systematic variation in Foreign Direct Investment (FDI) is explained by company Income Tax (CIT), Value Added Tax (VAT), Education Tax (ED) and Customs and Excise Duties (CED). The F-statistics with the value of 16.96471and P-value of 0.000017 shows that the model easily passes the F-test at 1%, 5% and 10% level of significance and this means that the hypotheses of a significant linear relationship between the dependent and independent variables taken together is validated by this study. It is therefore recommended that for Nigeria to secure a place as an economically viable nation in Africa, it must strive and achieve an internationally competitive tax system by eliminating all forms of multiple taxes in the country.
Foreign Direct Investment, Multiple Taxes, Government, Constitution, Nigeria
To cite this article
Akinwunmi Abiodun Jelil, Olotu Ayooluwa Eunice, Adegbie Folajimi Festus, Multiplicity of Taxes and Foreign Direct Investment: A Relational Analysis of Nigerian Tax Environment, Social Sciences. Vol. 6, No. 4, 2017, pp. 91-101. doi: 10.11648/j.ss.20170604.11
Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Auerbach A. J. & Hassett, K. (1993). Taxation and foreign direct investment in the United States: A reconsideration of the evidence, in: Alberto Giovannini, R. Glenn Hubbard and Joel Slemrod (eds.), Studies in International Taxation, Chicago University Press.
Bénassy-Quéré, A. L. Fontagne & A. Lahreche-Revil (2005). How does FDI react to corporate taxation? International Taxation and Public Finance, 12, 583–603.
Buckley, P. J., & Casson, M. C. (1976). The Future of the Multinational Enterprise. Homes, Meier: London.
Bucovetsky S. (1991). Asymmetric tax competition. Journal of Urban Economy, 30, 167-181.
De Mooij, R. A. & S. Ederveen (2001). Taxation and Foreign Direct Investment: A synthesis of empirical research, CESifo Working Paper, no. 588.
Denisia, V. (2010), Foreign direct investment theories: An overview of the main FDI theories. European Journal of Interdisciplinary Studies, 2(2), 104-110.
Desai, M. A., Foley, F. C., & Hines, J. R. (2006). Taxation and multinational activity: New evidence and interpretations. Research Spotlight. 16-22.
Desai, M. A. & Hines, J. R. Jr. (2001). Foreign direct investment in a world of multiple taxes. World Tax Competition Conference. JEL Classification: H87, H25, F23.
Devereux, M. P. & H. Freeman (1995). The impact of tax on Foreign Direct Investment: Empirical evidence and the implications for tax integration schemes, International Taxation and Public Finance, 2, 85–106.
Drago-Paun, I. N. (2013). Taxation and its effect on foreign direct investments: The case of Romania. Nanki O Financial Sciences, 3(16).
Dunning, J. H. (1981). International Production and the Multinational Enterprise, London: Allen and Unwin.
Financial Investment Advisory Service, (2008).
Gordon R. H. & Hines J. R. Jr. (2002). International Taxation, in Auerbach, A. J. & Feldstein, M. (eds), Handbook of Public Economics, 4, Elsevier.
Görg, H. & Strobl, E. (2001). Multinational companies and productivity spillovers: A Meta-analysis, Economic Journal 111, F 723–39.
Griffin, R. W. (2005). International Business. New York: Mc Graw-Hill Inc.
Haufler A. & Stöwhase, S. (2003). Taxes as a determinant of foreign direct investment in Europe, CESifo DICE Report 2, 45-51.
Hymer, S. (1976). The International Operations of Nation Firms: A Study of Foreign Direct Investment, Cambridge, MLT Press.
International Monetary Fund. (2014).
Izendomi, F. (2011). Eliminating Multiple Taxation in the Capital Market – The Capital MarketPerspective.http://www.secure.irsogun.org/downloads/ORIGIN%20OF%20MUL TIPLE%20TAXATION.pdf.
Joint Tax Board, (2010). The problem of multiple taxation. Business and finance.
Justman M., Thisse J. F., & Van Ypersele, T. (2001). Fiscal Competition and Regional Differentiation, 2-6.
Manufacturers Association of Nigeria, (2010).
Mark, J. & Nwaiwu, J. N. (2015). Impact of political environment on business performance of multinational companies in Nigeria. African Research Review, 9(3).
Mombert, H. & Nihal, P. (2011). Impact of multiple-taxation and competitiveness in Nigeria. Africa Trade policy Notes, 16.
Nigerian Institute of Social and Economic Research, (2016). Multiple Taxation and Industrial Performance in South West Nigeria.
Oseni, M. (2014). Multiple taxation as a bane of business development in Nigeria. Academic Journal of Interdisciplinary Studies, 3(1), 121-128.
Farlex Financial Dictionary (2012).
OECD Policy Framework for Investment (PFI) Toolkit, p. 29, ―Draft user guidance for the PFI tax policy questions‖, http://www.oecd.org/dataoecd/46/53/41890309.pdf
Okereocha, C. (2014). Multiple taxation hurting industrialists, businesses. Discuss luncheon organized by Manufacturing Association of Nigeria for Chief Executive Officers/Managing Directors of member companies.
Okolo, E. U., Okpalaojugo, E. C., & Okolo, C. V. (2016). Effect of multiple taxation on investments in Small and medium enterprises in Enugu State, Nigeria. International Scholarly and Scientific Research and Innovation, 10(1), 378-386.
Onyeukwu, H. (2010). Business Tax in Nigeria: The controversy of multiple taxation. http://works.bepress.com/humphrey_onyeukwu/9/, retrieved on 6 December 2016.
Omoigui, I. (2010). The problem of multiple taxation. Business and Finance.
Oyedele, T. (2015). Insights on taxation and fiscal policy. West Sussex: Bloomsbury Professional Ltd.
Pfister, M. (2009). Taxation for investment and development: an overview of policy challenges in Africa. NESPAD-OECD Africa Investment Initiative.
Sanni, A. (2012). Multiplicity of Taxes in Nigeria: Issues, Problems and Solutions. International Journal of Business and Social Science, 3(17), 229-236.
Tomonori, S. [2012]. Empirical analysis of corporate tax and foreign direct investment. Public Policy Review, 8(1), 1-20.
Vale Columbia Center on Sustainable International Investment, (2009).
Vernon R. (1966), International investment and international trade in the product cycle. uarterly Journal of Economics 80, 190-207.
Yin, X. (1999). Foreign direct investment and industry structure, Journal of Economic Studies 26(1), 38-57.
Browse journals by subject