Effect of Company Income Tax on Corporate Performance of Listed Manufacturing Firms in Nigeria

Abstract

Conundrum of the Nigerian economy is traceable to its manufacturing sector which is expected to stimulate the value-added economy and serve as a catalyst for sustainable economic transformation. Regrettably, Nigeria's manufacturing sector has been neglected without a clear policy direction with attendant annihilation of the sector from the growth process. Nigeria today is facing series of challenges when it comes to optimizing tax revenue for economic and social growth. Ex-post facto research design was adopted for this study. The population of this study covered all the 44 registered manufacturing firms dealing with consumable foods in Nigeria, purposive sampling technique was adopted to select only five listed manufacturing firms. The study found that CIT has a positive and significant effect on profit after tax (PAT) in Nigeria listed manufacturing firms that is, if there is a unit increase in Company income tax (CIT), profit after tax (PAT) will increase with over a unit. The study also found that, CIT has a positive and significant effect on Returns on Equity (ROE) while Change in Shareholders Fund (CSF) has a negative and significant effect on ROE. Based on the findings, the study concluded that, company income tax significantly affects the profit after tax, performance of the firms and earnings of shareholders. Company income tax significantly affects the profit after tax, performance of the firms and earnings of shareholders. The study therefore recommended that, fiscal policy adopted in Nigeria should consider the circumstances surrounding the activities of companies located in the country and the special role they play in the pursuit of economic growth of the nation. Also, government should ensure that revenue generated from corporate tax especially company income tax (CIT) should be utilized in the development of the general economy so as to improve the standard of living of her citizenry and increase her Gross Domestic Product (GDP).