Abstract
This paper develops an empirical framework to evaluate how corporate tax regimes influence investment diversion across borders, reframing statutory parameters into an investment- relevance index. Using corporate tax provisions from Kenya and Uganda for 2024/2025, an Investment Burden Index (IBI) was constructed from nineteen statutory parameters, including VAT, excises, stamp duties, withholding taxes, capital gains, and loss carry-forward. Each parameter was normalised, weighted by investment relevance, and aggregated to yield country-level scores, which were then linked with UNCTAD FDI inflows and outflows for 2023. The results indicate that Uganda’s tax system imposes a higher statutory burden (IBI –2.16) compared to Kenya (IBI –0.33), yet Uganda attracted larger FDI inflows in 2023 (USD 1.55 billion versus USD 0.46 billion). This underscores the mediating role of sector-specific opportunities, particularly energy and oil, which offset statutory disadvantages. The study contributes to debates on tax-induced diversion by showing that while corporate taxation matters, its impact is conditional and interacts with non-tax determinants such as natural resources and macroeconomic stability.
Agodo, O. (1978). The Determinants of U. S. Private Manufacturing Investments in Africa. Journal of International Business Studies, 9(3), 95–107. http://www.jstor.org/stable/154216
Cleeve, E. (2008). "How do tax holidays affect inward FDI?" African Economic Research Consortium. https://www.researchgate.net/publication/228157797_How_do_tax_holidays_affect_inward_FDI_Evidence_from_Sub-Saharan_Africa
Desai, M. A., Foley, C. F., & Hines, J. R. (2005). Do Tax Havens Divert Economic Activity? NBER Working Paper No. 11270. http://www.nber.org/papers/w11270
Erokhin, D. (2023). "Tax effects on foreign direct investment—Just a rerouting." The World Economy.
Erokhin, V. (2023). Tax effects on foreign direct investment: Evidence from emerging economies. World Economy, 46(7), 1923–1941. https://doi.org/10.1111/twec.13399
Ferguson, V. D., Krupa, T. J., & Laux, R. C. (2025). Tax Administration Quality and Foreign Investment in Developing Countries: Evidence from Participation in Tax Inspectors Without Borders. Journal of Accounting and Economics, 101832. https://doi.org/10.1016/j.jacceco.2025.101832
Hartman, David G., Tax Policy and Foreign Direct Investment in the United States (August 1982). NBER Working Paper No. w0967, Available at SSRN: https://ssrn.com/abstract=302544
International Monetary Fund (IMF). (2023). International Corporate Tax Reform. IMF Policy Paper.
International Monetary Fund (IMF). (2024). Citizens’ Perception of Tax Authorities and Tax Efficiency in Africa. IMF Working Paper.
International Monetary Fund. (2023). Regional economic outlook: Sub-Saharan Africa – Weathering the storm. Washington, DC: IMF. https://www.imf.org/en/Publications/REO
International Trade Administration. (2023a) Kenya Country Commercial Guide: Market Overview. [Online]: https://www.trade.gov/knowledge-product/kenya-market-overview. Accessed on 5th September 2025.
International Trade Administration. (2023a) Uganda Country Commercial Guide: Market Overview. [Online https://www.trade.gov/country-commercial-guides/uganda-market-overview. Accessed on 5th September 2025.
KPMG. (2025). Finance Act 2025: Kenya analysis. Nairobi: KPMG East Africa.
Organisation for Economic Co-operation and Development. (2023). Tax challenges arising from digitalisation – Report on base erosion and profit shifting (BEPS). Paris: OECD Publishing.
Organisation for Economic Co-operation and Development. (2023). Tax challenges arising from digitalisation – Report on base erosion and profit shifting (BEPS). Paris: OECD Publishing. https://doi.org/10.1787/beps-2023
PricewaterhouseCoopers. (2025). Kenya and Uganda corporate tax summaries. PwC Tax Summaries.
Tanzi, V., & Zee, H. H. (2001). Tax Policy for Developing Countries. IMF Economic Issues, No. 27.
Tewodros Sisay. (2025). East Africa economic outlook 2025. [Online]. Accessed via Deloitte. https://www.deloitte.com/us/en/insights/topics/economy/emea/africa-economic-outlook.html. Accessed on 5th September 2025.
Tibor Hanappi & David Whyman (2025). Tax and Investment by Multinational Enterprises (OECD Taxation Working Papers No. 64). OECD Publishing. https://doi.org/10.1787/e817ce39-
United Nations Conference on Trade and Development (UNCTAD). (2023). World Investment Report 2023: FDI inflows outflows by country. UNCTAD.
United Nations Conference on Trade and Development. (2023). World investment report 2023: Investing in sustainable energy for all. Geneva: UNCTAD.
World Bank. (2023). Doing business indicators and investment trends in Sub-Saharan Africa. Washington, DC: World Bank.
Zodrow, G. R. (2009). Capital Mobility and Capital Tax Competition. Baker Institute for Public Policy. https://www.bakerinstitute.org/sites/default/files/2013-08/import/TEPP-pub-ZodrowCapMobility-070309.pdf
Recent Publication
- Scanning published journal records…
Most Read
- Calculating article readership…
Recommended
- Matching titles and keywords…
