Does cultural economics affect country’s competitiveness?

Abstract

This work was carried out to test whether changes in corporate tax revenue results in any change in the level of foreign direct investment from one period to another, regarding 1994-2025,Data were drawn from the Central Bank of Nigeria and National Bureau of Statistics publications. For the foreign direct investment, output growth, inflation and exchange rate indices, we used the World Bank Development Indicators. Several specifications of the ordinary least squares model: static, dynamic with different time lags, with heteroskedasticity-and-autocorrelation-consistent standard errors were run. At the same time, some stationarity specifications, serial-correlation, multicollinearity and diagnostics checks were carried out. The dynamic estimate suggests that there is a minor change in FDI/ GDP which is as a result of fluctuation in corporate tax and not statistically significant. The findings remain essentially unchanged when there is a change in covariance lags or considered signed tax growth and different sub-samples as controls. In contrast, the negative correlation of tax volatility over three years was negative and weakly significant, suggesting that the annual change may not be as important as repeated instability over three years. Foreign direct investment is strongly positively related to output growth and negatively related to inflation. The results are inconsistent with the notion that all increases and decreases in corporate tax revenues have an adverse impact on foreign capital. Thus, policy should have a focus on predictable rules, administrative procedures, stable macroeconomic conditions, and revenue growth associated with compliance and productive growth, rather than sudden shifts in discretionary policy.

Keyword : Company Income Tax; Corporate Tax Fluctuation; Foreign Direct Investment; Fiscal Uncertainty; JEL Classification codes : H25, H25/E32, F21 and E62