International Journal of Economic Behavior and Organization

Submit a Manuscript

Publishing with us to make your research visible to the widest possible audience.

Propose a Special Issue

Building a community of authors and readers to discuss the latest research and develop new ideas.

Review Article |

The Effects of Tax Incentives on Private Domestic Investment in Addis Ababa, Ethiopia

The main purpose of this study is to assess the effects of tax incentives on private domestic investment in Addis Ababa, Ethiopia. The study has adopted a Quantitative research method in which primary data were collected from private domestic investors’ through questionnaires and also secondary data which has been collected from Ethiopian Investment Commission (EIC) and Ethiopian revenues and customs authority through document analysis. Descriptive research method was used to describe the major roles of tax incentive on private domestic investment. Hence, the finding reveals that the major role of tax incentive on private domestic investment is stimulating capital accumulation. On the other hand OLS regression method was employed to assess the respective effect of tax incentives on private domestic investment. Thus, the finding reveals that tax holiday and export duty free significantly affect the capital value of private domestic investment whereas customs duty exemption and loss carries forward were found having insignificant effect on capital value of private domestic investment. Regarding, the control variables age, occupation and infrastructure was founded to have a significant positive influence on capital value of private domestic investment. Moreover, in a bid to solve problems related with tax incentives and private domestic investment, clearly assessing and understanding costs and benefit of providing tax incentives and making it specific to private domestic investors demand as well as building transparent and accountable tax incentive administration were forwarded for both policy makers and implementers respectively.

Tax Holiday, Export Duty Free, Customs Duty Free, Loss Carries Forward

APA Style

Kassa, A. (2023). The Effects of Tax Incentives on Private Domestic Investment in Addis Ababa, Ethiopia. International Journal of Economic Behavior and Organization, 11(4), 164-173. https://doi.org/10.11648/j.ijebo.20231104.12

ACS Style

Kassa, A. The Effects of Tax Incentives on Private Domestic Investment in Addis Ababa, Ethiopia. Int. J. Econ. Behav. Organ. 2023, 11(4), 164-173. doi: 10.11648/j.ijebo.20231104.12

AMA Style

Kassa A. The Effects of Tax Incentives on Private Domestic Investment in Addis Ababa, Ethiopia. Int J Econ Behav Organ. 2023;11(4):164-173. doi: 10.11648/j.ijebo.20231104.12

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

1. Ambaye, G. G., Berhanu, T., & Abera, G. (2013). Modeling the Determinants of Domestic Private Investment in Ethiopia. AGRIS on-line Papers in Economics and Informatics, 5(4), 13.
2. Barbour, P. (2005). An Assessment of South Africa's Investment Incentive Regime with a focus on the Manufacturing Sector.'. Economic and Statistics Analysis Unit (ESAU).
3. Bayai, I., & Nyangara, D. (2013). An Analysis of Determinants of Private Investment in Zimbabwe for the Period 2009-2011.
4. Bes, M. (2013). Promoting Growth in the Caribbean: Tax Incentives in Theory and in Practice.
5. Bolnick, B. (2004). Effectiveness and Economic Impact of Tax Incentives in the Southern Africa Development Community (SADC) Region, report by Nathan-MSI Group to the SADC Tax Subcommittee. Gabarone, Botswana: SADC.
6. Clark, S., Cebreiro, A., & Bohmer, A. (2007). Tax Incentives for Investment–A Global Perspective: experiences in MENA and non-MENA countries. MENA-OECD Investment Programme.
7. Durlauf, S. N., Johnson, P. A., & Temple, J. R. (2005). Growth econometrics. Handbook of economic growth, 1, 555-677.
8. Deneke, S. (2001). Private sector development in Ethiopia. Addis Ababa, Ethiopia. March, 11, 2012.
9. Dereje, W. (2014). The implication of tax incentives in enhancing investment in the manufacturing sector. Addis Ababa: Ethiopian Civil service University.
10. Easson, A., & Zolt, E. M. (2002). Tax incentives. World Bank Institute, 1-36.
11. IMF. 2015. Options for low income countries effective and efficient use of tax incentives for investment. Retrieved January 04, 2016 from https://www.imf.org/external/np/g20/pdf/101515.pdf
12. Jain, D., & Mandot, N. (2012). Impact of demographic factors on investment decision of investors in Rajasthan. Researchers World, 3(2), 81.
13. James, S. (2009). Tax and non-tax incentives and investments: evidence and policy implications. FIAS, The World Bank Group.
14. Jordan, D. (2012). An overview of incentive theory and practice. a focus on the agro-processing industry in South Africa. Retrieved December 03, 2015, from www.nda.agric-za/doa dev/sidemen/agro process
15. Kasshun, K (2014). Effects of tax incentives schemes on government revenue. Addis Ababa: Civil service University.
16. Klemm, M. A. (2009). Causes, benefits, and risks of business tax incentives (No. 9-21). International Monetary Fund.
17. Mankiw, N. G., Weinzierl, M., & Yagan, D. (2009). Optimal taxation in theory and practice. The Journal of Economic Perspectives, 23(4), 147-174.
18. Mosioma, A. (2007). Tax Competition: The role of Tax incentives in encouraging harmful tax competition in the East African Flower industry. Tax Justice Network for Africa.
19. Muhdin, M. (2016). Determinants of Private Investment: A Systematic Review. International Journal of Economics, Finance and Management Sciences. 4 (2), 2016, pp. 52-56.
20. Piana, V. (2001). Investment: significance and composition. Retrieved from www.economic.webinstititute.org
21. Pissan, J. (2008). Firms’ incentives and Institutional frame work. Retrieved December 20, 2015 from http:/www.esa.org/iml/pdf/congrsee book.
22. Samuel, K. (2015). The impact of tax incentives in attracting foreign direct investment in Ethiopia. Addis Ababa: Addis Ababa University.
23. Summers, L. H., Bosworth, B. P., Tobin, J., & White, P. M. (1981). Taxation and corporate investment: A q-theory approach. Brookings Papers on Economic Activity, 1981(1), 67-140.
24. Tanzi, V., & Zee, H. H. (2001). Tax policy for developing countries (Vol. 27). International Monetary Fund.
25. United Nations. (2002). Investment and innovation policy review. Retrieved January 06, 2016 from http://www unctai. Org.