Corporate Tax Planning and Financial Performance of Listed Consumer Goods in Nigeria

Abstract

The multiplicity of tax laws and heavy tax burden facing companies in developing countries such as Nigeria has resulted in the adoption of different strategies to reduce tax liabilities. The main objective of this study therefore was to examine the effect of tax planning on financial performance of listed consumer goods firms in Nigeria from 2013 to 2022. The measures of tax planning adopted in this study were effective tax rate, tax incentives, debt tax shield and capital intensity. Return on assets was the measure of financial performance. The research design adopted for this study was ex-post facto because secondary data was used. The population of this study consisted of 21 listed consumer goods companies in Nigeria and purposive sampling technique was employed to select 18 of these companies. The ordinary least square regression technique was used to analyze the data and the statistical package employed was E-views version 10. The findings of the study revealed that effective tax rate has a negative and insignificant effect on the return on assets (ROA); tax incentives has a significant positive effect on return on assets; debt tax shield has significant and positive effect on return on assets; capital intensity has a positive but insignificant effect on return on assets of listed consumer goods firms in Nigeria. Thus, it was concluded that tax planning activities impact on the financial performance of listed consumer goods firms in Nigeria. Based on the above it was recommended among others that the management of consumer goods companies should focus on long term tax planning rather than solely concentrating on reducing effective tax rate. The management of consumer goods companies should also explore and take full advantage of available tax incentives by capitalizing on applicable tax incentives provided by the regulatory environment.