The effects of corporate income tax incentives on mining firms’ investments in fixed assets: The case of Zimbabwe (2009-2011)

Abstract

This article evaluates the effects of corporate income tax incentives on individual mining firms’ investments in fixed assets. The main objective was to assess whether corporate income tax incentives have improved Zimbabwe mining firms’ investments in fixed assets for the period 2009 to 2011. Panel data econometrics methodology was employed, using firm level data that was obtained from a sample of thirty-seven mining firms. A positive relationship between capital redemption allowances and firms’ investment in fixed assets was confirmed. It was also established that a positive relationship existed between assessed losses carried forward and investment in fixed assets. On the contrary, a negative and significant relationship was confirmed between corporate income taxes and the investment variable. Effective tax rates were found to have no effects on investment in fixed assets. The study recommends that the identified corporate income tax incentives are necessary, but should be granted with caps or sunset clauses in line with modern trends and best practice in the granting of tax incentives.