Joseph, Fineboy Ikechi 1 ; Alpheaus, Ogechi Eberechi 2 , & Nwaigburu, Kingsley Obinna 3 .
1 Department of Accounting, Clifford University, Owerrinta , Abia State.
E-mail: fayooxyz2009@yahoo.com
2 Associate Chartered Accountant & Lecturer, Department of Accounting, College of Management
Sciences, Michael Okpara University of Agriculture, Umudike, Abia State, Nigeria.
E-mail: alpheausogechieberechi@gmail.com
3 Department of Accounting, Alvan Ikoku Federal University of Education, Owerri Imo State,
Nigeria.
Abstract
This study investigates dwindling foreign direct investment in developing nations of Africa as a
consequence of capital flight perpetrated mostly by Multinational Corporations (MNCs). Secondary data was employed for this study in the following countries; Nigeria, Gabon, Botswana, Cameroon and South Africa from 2005-2014. The study adopted ordinary least square regression analysis to test the hypothesis of the study. The result from the regression analysis shows that capital flight repatriation has significant impact on foreign direct investment which represents t-statistic of 2.531 with F- statistic = 21.70; R 2 = 0.837, and R -2 = 0.701 with the p-value 0.016 < 0.05%. It can be deduced from the result obtained that the constant parameter in the long run is positive. This implies that if all the explanatory variables are held constant, foreign direct investment (FDI) will increase thus bringing about increased employment generation, increase Gross Domestic Product (GDP) of these nations, decrease interest rates, impact positively on exchange rates as well as help in nation building in less developed nations. This study concluded that capital flight has a significant impact on dwindling foreign direct investment in developing nations of Africa. It therefore, recommended that foreign investors and MNCs should be meant to stop illicit outflows via capital flight throughmore stringent international tax laws aimed at entrenching transparency on how MNCs file in their tax liabilities. Finally Governments should establish public registries of verified beneficial ownership information on all legal entities, and all banks should know the real beneficial owners of any account in their financial institution. Government authorities should adopt and fully enforce all of the Financial Action Task Force’s (FATF) anti-money laundering
recommendation.Governments should oblige multinational companies to openly make known their
revenues, profits, losses, sales, taxes paid, subsidiaries, and staff members levels on a country-by-country basis including ensuring that all countries take part in the automatic exchange of tax information as endorsed by OECD and G20. As regards trade mis-invoicing, trade transactions involving a tax haven should be treated with the highest level of examination by customs agencies.
Keywords: Illicit Financial Flows, Tax Evasion, Tax Avoidance, Multinational National Companies
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