The effects of tax incentive on industrial performance in Uganda: A case study in Namanve Industrial Park

Abstract

In the growth and development literature, capital accumulation and industrialization are considered the crucial and critical key to economic growth. Given this, many developing countries particularly Uganda which follows agriculture led industrialization policy made number of attempts to increase ratio of investment in the country. Tax incentives schemes are among the attempts made to create investment friendly environment. This study poses a general question of whether or not investment inflows have increased in Uganda because of the tax incentives offered; and thus whether or not offering such incentives has been beneficial to the country. To answer this question the study adopts mixed methods of research by using both descriptive and inferential statistics where primary data is collected using interview with MOFPED and URA officials and secondary data is collected from different sources such as MOFPED,UIA,URA ,IMF and World bank. Descriptive statistics is used to analyze the trends of investment inflows, Inferential statistics is also used by employing time series OLS model. A 21 years secondary data from 1996-2016 was collected then time series OLS regression was applied by employing IP as dependent variable along with tax incentives as independent variable and GDP growth rate, inflation, human development index. The regression result show that tax incentives and human development index have significant positive long run effect on industrial performance in terms foreign direct investment, gross domestic product growth rate on the other hand is insignificant on foreign direct investments according to this study. Hence to promote the FDI, the study recommends that the government should continue marketing the tax incentive scheme and bring them to be on budget. Further the study recommended that the government should continue working on improving the trade and infrastructural environment of the country.