Tax Incentives:Tools for attracting Foreign Foreign Investment in Nigerian Economy.

Tax Incentives:Tools for attracting Foreign Foreign Investment in Nigerian Economy.

Author by Dr. Folajimi Festus Adegbie

Language: English

Abstract

International Journal of Research in Commerce and Management,India February 2011 Volume 2 Number 2 pp.16-21. The paper observes that economic integration increases, individuals and businesses gain greater freedom to take advantage of foreign economic opportunities. That, in turn, increases the sensitivity of investment and location decisions to taxation. Countries feel pressure to reduce tax rates to avoid driving away their tax bases. International “tax competition” is increasing as capital and labour mobility rises. Most countries in West Africa have pursued tax reforms to ensure that their economies remain attractive for investment. Having limited economic options the countries in the region have made tax competition a central part of their development strategy to attract and retain the companies in their countries. This paper reviews the debate about the effectiveness of tax incentives, examining two most-contested questions: Can tax incentives attract foreign investment? And what are the costs of using them? The paper concludes that tax incentives can play a useful role in encouraging both domestic and foreign investment, and how useful and at what cost depends on how well the tax incentive programmes are designed, implemented and monitored. However developing countries must first provide a safe investment climate, political and social stability, reduction of corruption, and a reliable legal structure.


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