Impact of Tax Incentives on Foreign Direct Investment: Evidence from Africa

Round 1

Reviewer 1 Report

The paper examines the influence of tax incentives on foreign direct investment in Sub- Saharan African economies based on data from 2000-2018. The key findings are: FDI responds to lower corporate income tax (CTR);  foreign direct investment predominates in Sub-Saharan African economies with longer tax holidays and withholding tax;  tax concession is insignificant to the inflows of FDIs in Sub-Saharan Africa. The authors recommend that ” without proper restructures of the tax incentives to deal with policy lapses by the governments of Sub-Saharan Africa, achieving the four main goals: poverty eradication, sustainable growth and development, African integration in the competitive global economy and women empowerment would be hindered”. The topic is interesting and within the scope of the journal.

 

Main comments

1.With a few exceptions, the paper is well structured and written.

2.The title of the article is clear and adequate.

3.The abstract is clear, it presents the object of research, the content, and the results.

4.The introduction states the objectives of the paper and the relevance of the research work.

5. The methodology seems sound.
6. The results and interpretations are correct.

 

Minor concerns

 

In the literature review section, the authors must stress the variety of factors that influence the level of FDI (e.g., IMF programmes, FDI promotion) in emerging and developing economies  (see recommended readings). Also, the reference in the text should be made using the authors' name, not only the number at the beginning of the proposition. For example, on page 3, it should be

Abille et al. [26] instead of “[26] in their attempt to explore the function”.

 

2. The title should be: Impact of Tax incentives on Foreign Direct Investment. Evidence from Sub-Saharan Africa

 

3. I strongly recommend you to test the robustness of your findings.

 

4. There are some typos in the paper that need to be addressed (e.g. “against the business environ for foreign investments”.

 

Suggested readings:

1. FOREIGN DIRECT INVESTMENT FLOWS AND IMF LENDING PROGRAMS. NEW EMPIRICAL EVIDENCE FROM CESEE COUNTRIES, SCIENTIFIC ANNALS OF ECONOMICS AND BUSINESS, Volume 63, Issue 3, Page 311-320, DOI10.1515/saeb-2016-0124
2. Competitiveness and Investment Promotion in Bulgaria and Romania, FOREIGN DIRECT INVESTMENT IN CENTRAL AND EASTERN EUROPE: POST-CRISIS PERSPECTIVES, Book SeriesStudies in Economic Transition, Page 219-240, DOI10.1007/978-3-319-40496-7_10

Author Response

Response to Editor and Reviewers

 

First, we would like to express our gratitude for the work you dedicated for investigating our research, identifying the points for improvement, and suggesting ways for achieving that. We are fully aware that your suggestions and recommendations are very important for improving our research and the way it is presented in this article.

This letter is to confirm that all final corrections and suggestions from the Editor-in-Chief and Reviewers have been addressed, corrected, and implemented. In addition, the authors have reviewed the manuscript thoroughly for possible style and language changes or substitutions.

Thank you and we hope we have answered all your suggestions and recommendations and improved our research. Please find the following points have been addressed.

• The title of the paper has been revised to suit the aim of the research
• The introduction to the study has been duly modified to capture the focus and key issue pertaining to the topic. A clearer theoretical approach has been also adopted for better conceptualization of issues have been discussed.
• All factual statements have been appropriately referenced to acknowledge the right authorities. In-text citations have been adjusted to include texts for clarity.
• Literature review has been modified to capsulate the objective, sample used, methodology adopted as well as findings. The main contributions of these resources are made clearer. Recent studies necessary for the research have been included in the study to assess the current trends. This has also contributed to the interpretation of findings. Suggested literatures by reviewers have been added and duly cited.
• Reason for choosing the sample countries has been explained and the list of countries also listed.

• Research methodology and discussion have been thoroughly explained. The instruments used by the authors have been revised

• The recommendation for robustness check of our findings has been done and explained
• The instruments used by the authors have been revised and discussed
• The number of observations was explained in the paper.
• There were wrong transpositions in the regression results table 3 which have been corrected.
• In-text citations have been adjusted to include texts for clarity.
• The level of the language was improved as the final proof reading has been done.

In a nutshell, there have been a proper revision of the manuscript thanks to all the comments and recommendations of the reviewers.

 

 

 

Author Response File: Author Response.pdf

Reviewer 2 Report

The paper starts with an error in the title, and continues from there. The countries included in the analysis are not all in sub-Saharan Africa. In fact, there is no real justification for the collection of countries used, other than, I assume, data availability.

The literature review is mostly just a synopsis of papers on the subject, without linking them to the paper. It seems like the research questions were tailored to the data available on tax policies in Africa. 

The variables themselves are not always usefully defined, for example taxh and taxc, where the values 1 and 2 are quite randomly assigned and have no quantitative meaning. Using a dummy variable in this case would have been the correct choice.

What we don't see in the summary statistics is the variation of the explanatory variables in each country. It may well be that there is little variation, thus justifying the use of the random effects model over the fixed effects model. On the other hand, there may be time invariable characteristics of the different countries (e.g. natural resource abundance) that are not controlled for in the random effects model. 

Somewhere in the transition from Table 2 to Table 3, a total of 759 observations out of 893 are lost, and the mean of the dependent variable changes. What happened?

Two of the variables are interpreted as having a significant effect even though their p-value is higher than 0.1. There are other things that are questionable on Table 3, for example confidence intervals that do not match the value of the coefficients or the p-value.

I have attached a pdf with some comments. I started commenting on the language but stopped when I realized the paper needs a lot of editing.

The only connection of the paper to sustainability is by mentioning the SDGs. Other than that it is not in any way related to the subject.

Author Response

Response to Editor and Reviewers

 

First, we would like to express our gratitude for the work you dedicated for investigating our research, identifying the points for improvement, and suggesting ways for achieving that. We are fully aware that your suggestions and recommendations are very important for improving our research and the way it is presented in this article.

This letter is to confirm that all final corrections and suggestions from the Editor-in-Chief and Reviewers have been addressed, corrected, and implemented. In addition, the authors have reviewed the manuscript thoroughly for possible style and language changes or substitutions.

Thank you and we hope we have answered all your suggestions and recommendations and improved our research. Please find the following points have been addressed.

• The title of the paper has been revised to suit the aim of the research
• The introduction to the study has been duly modified to capture the focus and key issues pertaining to the topic. A clearer theoretical approach has been also adopted for a better conceptualization of issues have been discussed.
• All factual statements have been appropriately referenced to acknowledge the right authorities. In-text citations have been adjusted to include texts for clarity.
• Literature review has been modified to capsulate the objective, sample used, methodology adopted as well as findings. The main contributions of these resources are made clearer. Recent studies necessary for the research have been included in the study to assess the current trends. This has also contributed to the interpretation of findings. Suggested kinds of literature by reviewers have been added and duly cited.
• The reason for choosing the sample countries has been explained and the list of countries is also listed.

• Research methodology and discussion have been thoroughly explained. The instruments used by the authors have been revised

• The recommendation for robustness check of our findings has been done and explained
• The instruments used by the authors have been revised and discussed
• The number of observations was explained in the paper.
• There were wrong transpositions in the regression results table 3 which have been corrected.
• In-text citations have been adjusted to include texts for clarity.
• The level of the language was improved as the final proofreading has been done.

In a nutshell, there has been a proper revision of the manuscript thanks to all the comments and recommendations of the reviewers.

 

 

 

Author Response File: Author Response.pdf

Reviewer 3 Report

I believe that a few amendments should be included:
1. The introduction should be short and to the point. Include a clearly defined goal and possible research hypotheses. The remaining part should be a literature review and a possible description of the situation in the analyzed topic. Currently in the introduction there is even a graphic presentation (fig. 1).
2. If we consider data from the years 2000-2018 and these are annual data, we have only 9 observations for each variable. This is too little data for econometric modeling.
3. Why is the proposed model linear? Perhaps a non-linear form would be better? Please justify the choice of the analytical form.
4. We don't even know if the variables proposed for the model are good predictors. Nobody verified it.

Author Response

Response to Editor and Reviewers

 

First, we would like to express our gratitude for the work you dedicated for investigating our research, identifying the points for improvement, and suggesting ways for achieving that. We are fully aware that your suggestions and recommendations are very important for improving our research and the way it is presented in this article.

This letter is to confirm that all final corrections and suggestions from the Editor-in-Chief and Reviewers have been addressed, corrected, and implemented. In addition, the authors have reviewed the manuscript thoroughly for possible style and language changes or substitutions.

Thank you and we hope we have answered all your suggestions and recommendations and improved our research. Please find the following points have been addressed.

• The title of the paper has been revised to suit the aim of the research
• The introduction to the study has been duly modified to capture the focus and key issues pertaining to the topic. A clearer theoretical approach has been also adopted for the better conceptualization of issues have been discussed.
• All factual statements have been appropriately referenced to acknowledge the right authorities. In-text citations have been adjusted to include texts for clarity.
• Literature review has been modified to capsulate the objective, sample used, methodology adopted as well as findings. The main contributions of these resources are made clearer. Recent studies necessary for the research have been included in the study to assess the current trends. This has also contributed to the interpretation of findings. Suggested works of literature by reviewers have been added and duly cited.
• The reason for choosing the sample countries has been explained and the list of countries is also listed.

• Research methodology and discussion have been thoroughly explained. The instruments used by the authors have been revised

• The recommendation for robustness check of our findings has been done and explained
• The instruments used by the authors have been revised and discussed
• The number of observations was explained in the paper.
• There were wrong transpositions in the regression results table 3 which have been corrected.
• In-text citations have been adjusted to include texts for clarity.
• The level of the language was improved as the final proofreading has been done.

In a nutshell, there has been a proper revision of the manuscript thanks to all the comments and recommendations of the reviewers.

 

 

 

Author Response File: Author Response.pdf

Round 2

Reviewer 3 Report

Thank you for including your comments in the text of the article.