Effect of Marginal Tax Rate on FDI Inflow of Selected African Countries

Abstract

In this present reality where an increasing number of governments compete hard to attract multinational companies, tax incentives have become a global phenomenon. There exist contending views among the researchers not only on the provision of tax incentives to draw in foreign direct investment but additionally on the viability of the foreign direct investment (FDI) in augmenting tax revenues. Hence, the goal of this research is to empirically examine the effect of marginal tax rate on FDI of selected African countries. Data collection was the analytical work on the behaviour of foreign investors towards tax incentives in Africa which is based on a large Afro barometer Survey which was collected in 2013, 2014, and 2017 in 12 selected African countries.  The interviews are based on more than 143 face-to-face interviews in 2013 and 2014 and 157 in 2017. The survey used a clustered, stratified, multi-stage probability sampling design. The data was analyzed using Statistical Package for Social Science (SPSS) version 21. The descriptive statistic, factor analysis, correlation matrix and finally, hierarchical multiple regression analysis were carried out. The result revealed that tax incentive has a significant effect on FDI inflow of selected African countries. It was also discovered that efficient Tax incentives determinants have a significant relationship with Returns on Investment in the African countries. The paper, therefore, recommends that, for African countries to attain the efficiency of their policy, such tax incentive determinants need to be given due consideration.