Corporate Taxes and Financial Performance of Quoted Manufacturing Companies in Nigeria

Abstract

The study empirically investigated the effect of corporate taxes on financial performance of quoted manufacturing companies in Nigeria. The population of the study consists of sixty quoted manufacturing companies in Nigeria. The study adopts purposive sampling techniques to select thirty quoted manufacturing companies as a sample size. Secondary data was obtained from audited annual financial reports of quoted manufacturing companies in Nigeria from 2006-2020. Hypotheses formulated were tested using panel least squares regression through pooled effect, fixed effect, and random effect, determined by the Hausman test, fixed effect regression was preferred for results interpretation with the aid of Eviews 10 econometric statistical software. Findings show that companies’ income tax, capital gains tax, and tertiary education tax had insignificant effects on return on equity of quoted manufacturing companies in Nigeria. Companies’ income tax and tertiary education tax had insignificant effect on return on capital employed of quoted manufacturing companies in Nigeria. Companies income tax and tertiary education tax had insignificant effect on net profit margin of quoted manufacturing companies in Nigeria. Capital gains tax had significant effect on return on capital employed and net profit margin of quoted manufacturing companies in Nigeria. The study concludes that corporate taxes have insignificant effect on financial performance of quoted manufacturing companies in Nigeria. The study recommends, among others, that the government should introduce new tax incentives, tax exemptions, tax allowances, tax relief, tax rebates, and tax shelters for corporate taxes. Capital gains tax should be scrapped to enable companies to plough back profit on sale of assets into their business operations. The government should create a corporate tax management database through modern information technology to ensure effective and efficient corporate tax administration.