The Effect of Corporate Profits Tax on Foreign Direct Investment in Algeria for the Period 1992-2017 Using NARDL

Abstract

This study aims to investigate the effect of corporation profits tax on foreign direct investment in Algeria during the period (1992-2017). In doing so we use the modern methodology of the non-linear autoregressive distributed lag model developed by (Shin et al. 2014). The new approach allows to analyze non-linear and symmetric integration relationships among variables. The obtained results indicate that tax parameter on corporate profits is not significant in terms of positive and negative changes with the flow of foreign direct investment in the long run. According to the estimating Error Correction model we notice that foreign direct investment in Algeria responds negligible and inverse to the corporate Tax changes, whether it is a negative or positive changes, and this results support most previous studies which is rising corporate tax may be an obstacle, but not significantly to investor decisions, and in the case of reducing corporate tax, it may not be an important incentive to attract foreign funds.