AMJD Volume. 12, Issue 3 (2023)

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Contributor(s)

Ssentamu Ismail, Ukaidi Chris U. A, Mutasa Felician & Lyanga Timothy
 

Keywords

Fiscal Policies Foreign Direct Investments Corporate Income Tax Government Expenditure.
 

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Fiscal policy and Foreign Direct Investments inflows in Tanzania: 1991 – 2022

Abstract: This study investigated whether Foreign Direct Investments (FDIs) inflow in Tanzania is significantly affected by fiscal policy tools such as Corporate Income Tax rate (CIT) and Government Expenditure (GEX) from 1991 to 2022. The study aimed to examine the causal link between CIT rate and FDIs inflows and GEX and FDIs inflows. The study employed an Augmented Dickey-Fuller (ADF) Unit-root test to check on the stationarity of variables and then utilized the Co-integration and Error correction model (ECM) to calculate the short-term and long-term impacts of one time series on another. The findings proved a negative short-run and long-run correlation between GEX and FDI but, the casual connection between CIT and FDI is insignificant. Therefore, we fail to reject the null hypothesis of the relationship between CIT and FDI because the observed outcome is contrary to the expected results. The study revealed that fiscal policy incentives are not significant factors influencing FDI inflows. Therefore, the policy options are, that the government should rely mostly on non-fiscal policy incentives like dependable macroeconomic policy, low startup and operating expenses for enterprises, high-quality infrastructure, and political stability in attracting FDI inflows in Tanzania.
 
 
 

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