IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 4 NO. 7 2018

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Effect of Tax Incentives on Foreign Direct Investment in the Petroleum Industry in Nigeria

Arzizeh T. Tapang, Benjamin E. Onodi & Akachukwu H. Amaraihu

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Abstract

This study focused on the effect of tax incentives on foreign direct investment in the petroleum industry in Nigeria. In the petroleum industry the issue of tax incentive has not really received a positive attention because the people think that the sector is rich enough to pay all taxes. Though there is little level of tax incentives in the oil sector, but this cannot be compared to what we have in the private sector. The ability to sustain itself and to expand petroleum industries are faced with the problem of high tax rates, multiple taxation, complex tax regulations and lack of proper enlightenment or education about tax related issues. These have led to an increase in record of dearth of petroleum industries in Nigeria. An ex-post-facto research design was adopted. Secondary data were collected and analyzed using regression analysis with the aid of STATA 13. The findings revealed that tax incentives proxy by investment tax allowance, non-productive rent, capital allowance has a significant effect on foreign direct investment. Based on the findings it is concluded that firms’ enjoying tax incentives will generate more employment opportunities than firms in highly taxed regions. Conducive investment climate is a strong requirement for the flow of sustainable physical investment in an economy. Tax incentives positively influences the living standards and per capital income, and expand variety of goods available to consumers. The study recommends that tax policies should be amended to eliminate double taxation. Also it is recommended that tax incentives should be effectively implemented and efforts should be made by relevant tax authority to ensure that firms benefit from these incentives. Finally, investment climate in the country should be made conducive through effective policy formulation, implementation and the provision of adequate functional physical infrastructure.

keywords:

Capital Allowance, Foreign Direct Investment, Investment Tax Allowance, Non- Productive Rent, Tax incentives

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