EFFECTIVNESS OF TAX INCENTIVE IN PROMOTING INVESTMENT IN ETHIOPIA

Abstract

Investment plays a significant role in the development process of developing countries. Given this many developing countries particularly, Ethiopia is striving to become middle income level country. In order to realize this goal promoting investment activity has a major significance. Fiscal incentive was one among the attempts made to create investment friendly environment. This paper objective was to see the relation between fiscal incentives and investment and analyzes the effectiveness of tax incentive in promoting investment to Ethiopia. The study gathers the information from Ethiopian revenues & customs authority and Ethiopian investment agency officers through questionnaire. The study concludes that the tax system and fiscal incentive administration in the country is not in satisfactory level due to lack of clear regulation that can serve all scenarios. Regarding the investment volume, it’s increasing from time to time and non tax factors are considered as influential in the investment decisions. In addition cheap labor cost and market opportunities have their own contribution in the investment growth. Infrastructural facilities were considered as an obstacle in the investment promotion activity.