Tax Policy And Foreign Direct Investment In Rwanda Between 2008-2012: A Case Of Kigali City.

ABSTRACT

This study determined the relationship between tax policy and foreign direct investment in Kigali City, Rwanda. In order to achieve the purpose of the study, three research objectives were formulated and these included: To determine effectiveness of tax policy in Rwanda; to determine the level of foreign direct investment in Kigali; and to establish whether there was a significant relationship between tax policy and foreign direct investment in Kigali city, Rwanda. The research design used in this study was the descriptive correlation design. The research population was 180 from which 125 respondents were determined using Slovene’s formula. The method of sampling used was purposive sampling and questionnaires were used as the main data collection tool. To ensure validity and reliability of the research instruments, content validity index was done together with pretesting. The data collected was analyzed both qualitatively (mean, correlation and regression coefficient) and quantitatively and this was done with the help SPSS.

The research findings showed that the tax policy in Rwanda was generally effective (overall

average mean of 2.58); the level of foreign direct investment, in the country was also highly rated (overall mean average of 2.67); and it was also found out that tax policy is positively correlated with the foreign direct investMent at (R. ~0.692, and significant value of 0.000).

It was then concluded that the tax policy in Rwanda is generally high; the level of foreign direct investment in the country is also high; and that there is a significant relationship between tax policy and foreign direct investment in Kigali city, Rwanda.

Since the two study variables (tax policy and foreign direct investment) were found to be

significantly related, it was recommended that the ministry of finance and economic planning should revise different areas of tax policy and amend areas that discourage foreign direct investment in the country.