Tax Planning Strategies and Profitability of Quoted Manufacturing Companies in Nigeria

Ishola Rufus Akintoye · Folajimi Festus Adegbie · Chimeruo Victory Onyeka-Iheme

19 citations0/0 files storedJournal of Finance and Accounting

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Corporate Taxation and Avoidance Economic and Fiscal Studies Taxation and Legal Issues

Abstract

Profitability has been the aim of every commercial enterprise but are often not actualized due to high costs and high Effective Tax Rates (ETR). In order to manage the effects of taxes on the profitability of firms, strategies are employed to plan the taxes. This research work focused on effect of Tax Planning Strategies on Profitability of manufacturing firms in Nigeria. Ex-post facto research design was adopted for the study. The main objective of the study was to examine the effect of Tax Planning Strategies on Profitability of Quoted Manufacturing Companies in Nigeria. The population of the Study comprised of 52 manufacturing companies quoted on the Nigeria Stock Exchange as at 17th December, 2018 with 46 as the sample size calculated using Taro Yamani’s formula. Data were collected from the audited annual reports of the sampled companies for a period of 10 years (2008 – 2017). The validity and reliability were based on the statutory audit of the financial statements. Descriptive and inferential statistics were used to analyze the data. The result revealed that there is no significant effect of TP on Return On Assets (ROA) of Quoted Manufacturing Companies in Nigeria. This is evidenced by the results of the test, Adj.R2 = -0.000527 and F-Statistics = 0.919439 and P-value of 0.431292. The Study concluded that tax planning strategies have both negative and positive effects on profitability of Quoted Manufacturing Companies in Nigeria. The study recommended that Tax Managers and Finance Officers should reduce thin capitalization and Capital Intensity to balance the source of income of manufacturing firms, while Research and Development costs should be properly managed to increase their contributions to profitability. Professional Tax Practioners should also be consulted for maximum benefit from tax planning.

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References

2008What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement 2018Intellectual Capital, Financial Performance and Companies’ Sustainable Growth: Evidence from the Korean Manufacturing Industry 2009R&D Investment, Exporting, and Productivity Dynamics 2018Tax Avoidance, Corporate Governance and Firm Value in The Digital Era 2016Corporate Tax Avoidance and Performance: Evidence from China’s Listed Companies 2012The Impact of Capital Intensity, Size of Firm And Profitability on Debt Financing In Textile Industry of Pakistan 2018Firm specific determinants of corporate effective tax rate of listed firms in Nigeria 2016Tax Planning and Firm Value: Empirical Evidence from Nigerian Consumer Goods Industrial Sector

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