Corporate Tax Planning and Financial Performance in Nigerian Non‐Financial Quoted Companies

Abstract

This study investigates the relationship between corporate tax planning and financial performance of quoted non‐financial companies. The secondary yearly data used were gathered from 47 sampled non‐financial companies from 2007 to 2016. A panel vector autoregressive approach with structural analysis such as variance decomposition and impulse response function was adopted. The results of the study revealed that tax saving had a direct relationship with financial performance, while tax avoidance had an inverse relationship with financial performance. The financial variables under consideration mainly contributed to their own shocks or forecast errors. The responses of the financial performance to shocks in tax avoidance had an expansionary effect which could hinder the performance of the companies, while financial performance response to shocks in tax savings had a contractionary effect and as such, could lead to better performance of the companies. Thus, corporate tax planning that enhances tax savings greatly contributes to the performance of non‐financial companies. They should therefore not only engage in tax planning, but also ensure that their tax planning is legal, and leads to tax saving for the companies, such that no excessive or multiple tax will be paid and hence, better financial performance will be achieved.

Tax Aggressiveness and Financial Performance of Listed Industrial Goods Firms in Nigeria

“…The revenue authority has recently shown great interest in companies that have been aroused on their operations due to a difficult commercial environment and the search for complex tax evasion mechanisms. This has also been complicated by the transfer pricing models of the company (Olarewaju & Olayewola, 2019). Fagbem et al (2019) maintain that Tax planning can be conceptualized as a legal act of transferring economic value from the state to the firm through the minimization of the tax liability by taking advantages of loopholes in tax laws and policies.…”

“…Olayiwola and Olarewaju (2019) investigate the relationship between corporate tax planning and financial performance of quoted non-financial companies. The secondary data used were gathered from 2007 to 2016 annual reports of 47 sample firms from non -financial companies.…”

“…Tax planning aimed at increasing the distributable profit by reducing tax expenses usually involved extensive strategy used by management to ensure that the firm pays the lowest tax to government. It seen as conscious efforts and a means of wise treatment of economic affairs of an individual, trust or firm, with the aim of obtaining the desired tax benefits, taking in to consideration the legislative and judicial stand (Olarewaju & Olayewola, 2019). By reducing tax payment through tax planning, it means an improvement in financial performance because lower tax payment means higher distributable income.…”

Pengaruh Pajak Tangguhan dan Perencanaan Pajak Terhadap Kinerja Perusahaan

“…Tujuan dari perencanaan pajak ialah untuk menambah tingkat profitabilitas perusahaan, sehingga lebih banyak menarik investor (Sipahi, 2020). Selain menarik investor, perencanaan pajak digunakan untuk meningkatkan kinerja dari perusahaaan (Olarewaju & Olayiwola, 2019). Terdapat beberapa cara dalam menilai apakah perencanaan pajak perusahaan tersebut baik atau tidak.…”

“…Perencanaan pajak adalah cara-cara mengelola utang pajak agar berada pada jumlah yang minimum namun tidak melanggar peraturan yang ada (Pohan, 2013). Perencanaan pajak diharapkan akan meningkatkan kinerja perusahaan (Olarewaju & Olayiwola, 2019) sehingga menambah tingkat profitabilitas perusahaan, yang pada akhirnya akan lebih banyak menarik investor (Sipahi, 2020). Berdasarkan perhitungan statistik, perencanaan pajak tidak berpengaruh terhadap kinerja perusahaan.…”