Tax Incentives and Investment Growth: The Nigerian Perspective

Journal of Economics and Business

ISSN 2615-3726 (Online)

ISSN 2621-5667 (Print)

Published: 13 March 2020

Tax Incentives and Investment Growth: The Nigerian Perspective

Chukwuma C. Ugwu, Iyana E. Okwa, Ernest E. Inyang

Federal University Wukari, Nigeria

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10.31014/aior.1992.03.01.203

Pages: 363-373

Keywords: Tax Incentives, Investment Growth, Corporate Income Tax, Investment Allowance

Abstract

Tax Incentives and Investment Growth: the Nigeria perspective is aimed at determining the effect of tax incentives represented by corporate income tax rate and investment allowance on investment growth in Nigeria from 1985-2018. The study adopted Ex Post Facto Research Design and time-series data was used. Relevant secondary data for this study were collected from the Central Bank of Nigeria (CBN) Statistical Bulletin, the National Bureau of Statistics (NBS) and the Federal Inland Revenue Service (FIRS). The study employed ordinary least square estimation and used regression analysis to test the relationship between Tax Incentives and investment growth in Nigeria. The study shows that tax incentive policy is positively and significantly related to gross fixed capital formation. The findings showed that tax incentives have positive impact on gross fixed capital formation. The findings showed that there is a degree of relationship between corporate income tax and gross fixed capital formation; and that there is degree of co-variability between investment allowance and gross fixed capital formation in Nigeria. The result also indicates that a higher company income tax rate is associated with lower private investment and slower gross fixed capital formation. The implication of this finding is that since tax incentives represented by company income tax allowance and investment allowance have positive and significant impact on gross fixed capital formation, policy reform in other factors that affect investment growth is needed also to complement these incentives so that a better result can be achieved.

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