The Effects of Tax Incentives in Attracting Foreign Direct Investments for the Agro-processing Industries: A Case of Hwp Fresh and Dry Limited

Ghana trade policy and development agenda is to diversify through industrialization with emphasis on reducing its over-reliance on export of raw commodities towards adding value to its abundant raw materials to increase export earnings and stimulate economic activity in rural areas. However, the attraction of international firms due to the elimination of trade barriers in the global capital flows have generated competition among governments with more emphasis on attracting foreign direct investment. The research study explores how tax incentives can be used as a catalyst to attract foreign direct investment for the Agro-processing industries in Ghana. The research study further evaluates the various tax incentives for the agro-processing industry and how it contributes to performance, growth and sustainability. The study also discusses the relevance of government policy directions and interventions in moderating challenges faced by the industry. Finally, value-chain processes and case studies are provided for key agro-processing sub-sectors of the industry. The study chose HWP Fresh and Dry Company, a thriving Agro-based industries located in Adeiso in the Upper West Akim District in the Eastern Region of Ghana for its case study. The findings from the study affirms that foreign direct investment responds to lower corporate tax rate and foreign direct investment is attracted by regime that offers concessional tax rates to budding industries. It’s equally revealed that offering tax holidays and other concessional tax incentives greatly influence the survival and sustainability of Agro processing industries. The findings from the study indicated that offering tax incentive only does not attract foreign direct investment but other factors such as stable micro-economic indicators, lower cost of credit, and access to ready markets skilled labour. Investors are attracted by regime that offer lower Corporate Incentive Tax, because its positively influence profitability and guarantees returns at shortest gestation period.