Impact of Corporate Taxation on Foreign Investment and Economic Growth in Nigeria

In the contemporary world, foreign investment (FI) is highly sought after in the majority of developing nations since it fosters economic growth through improving managerial abilities, new process innovation, employee training, global production networks, transfer of technical capital, and market access. Unfortunately, Nigeria has seen minimal net foreign investment flow over the past ten years, which has had a serious detrimental effect on the country’s economic diversification and progress. In furtherance to this reality, this study examined the effect of corporate taxation on Foreign Investment in quoted and unquoted companies in Nigeria. The use of corporate taxation by the Nigerian government between 1990 and 2019 and its implications for Foreign Investment flow was assessed. Additionally, for the period of research, the study looked into how foreign investment impacted the nation’s economic growth. Specifically, the study determined how corporate taxation impacted quoted foreign investment in Nigeria, how corporate taxation impacted unquoted foreign investment in Nigeria, how unquoted foreign investment impacted Nigerian economic growth, how quoted foreign investment impacted Nigerian economic growth, and how corporation tax impacted Nigerian economic growth. The Central Bank of Nigeria Statistical Bulletin and the World Development Indicators (WDI) provided time series data on foreign investment flows, corporation income tax, value-added tax, petroleum profit tax, and gross domestic product. Graphs, tables, and econometric methods were used to examine the data. The result revealed that Corporation taxation affects quoted investment positively only in the short run, while it does not affect unquoted investment. The result on the impact of quoted and unquoted investments revealed an insignificant effect on economic growth. However, corporation taxation significantly impacted economic growth. Inflation revealed a strong and substantial impact on economic growth, while exchange rate demonstrated an inverse and significant impact on economic growth. The study established that corporation taxation proxy by company income tax, value-added tax and petroleum profit tax impacted both the quoted and the unquoted foreign investments in different proportions and that value-added tax as expected, being an indirect taxation, substantially has a high coefficient value against all other taxes. The study therefore recommended that the Federal government accelerate and deepen tax reform as several aspects of the tax system must be considered for review and modification. Furthermore, it recommended deepening of the nation’s tax reform by putting all machinery in motion to review some aspects of the law that inhibit the inflow of foreign investment.