The impact of tax incentives on foreign direct investment attraction: a literature review for Southern African Development Community  (SADC) and beyond.

Gumisai Jacob Gutu; Obert Sifile; Edson Gwangwava

doi:10.63726/jmsit.v2i1.249

Authors

Gumisai Jacob Gutu Arrupe Jesuit University
Obert Sifile Chinhoyi university of Technology
Edson Gwangwava Chinhoyi university of Technology

DOI:

https://doi.org/10.63726/jmsit.v2i1.249

Keywords:

Economic Development, Foreign Direct Investment, Policy Analysis, Race to the bottom, Tax breaks, Tax Incentives

Abstract

The efficiency of tax incentives in luring foreign direct investment (FDI) to the Southern African Development Community (SADC) area is investigated in this research, which puts its conclusions in a worldwide perspective. It analyses important elements impacting the effectiveness of tax incentive regimes via a thorough literature study, such as investor views, institutional quality, and economic circumstances. While tax incentives may greatly increase foreign direct investment inflows, comparative studies show that their efficacy varies by area, with Southeast Asia and the EU showing more constant performance. Mentioned in this study are best practices for designing tax incentives, focusing on sector targeting, transparency, and conformity to international norms. However, there are still gaps in our knowledge of these incentives' long-term effects, which call for further sector-specific and longitudinal studies in the future. Furthermore, the importance of non-tax considerations in FDI choices is emphasised, supporting a comprehensive strategy that balances tax breaks and revenue requirements. In the end, the analysis offers insightful information to SADC policymakers who want to establish efficient tax incentive schemes that draw in foreign capital and support long-term economic growth.

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