TAX LAWS AND SECURITY AS OBSTACLES TO FOREIGN DIRECT INVESTMENT

Abstract

Critical factors that encourage influx of foreigners to invest their capital in a country are there current laws, security and tax policies. This study examined tax laws and security as obstacles to Foreign Direct Investment (FDI) in Nigeria, at the moment when multinational companies are closing shops or businesses and relocating to nearby countries where tax laws are favorable, due to hash tax laws of the current Nigerian regime. In carrying out this research, a qualitative method or approach was used. This research is a thorough analysis of the existing works, books, economic reports and policy documents. It was discovered that Nigeria is one of the country that charges high corporate income tax compared to its neighboring countries. This high corporate income tax reduces the amount of profit after tax of foreign companies. The application for pioneer status of companies and the procedure for the approval can be lengthy and burdersome, hence discourage FDI inflow into the country. It was discovered also that the worsening security situation in Nigeria due to the activities of Bokoharam, Fulani hader, kidnapping, arm banditry, militancy is responsible for the discouragement of FDI. On the aspect of law, the Local Content Act breaks national treatment found in bilateral investment agreement between Nigeria and other countries. In addition, intellectual property laws are not effectively enforced, making it difficult for foreign investors to protect their rights. This paper recommends that, government should reduce Corporate Income Tax rate, increase of tax holiday period and provide adequate security to stop bokoharam, kidnapping, armed bandit to attract FDI.