Effect of Corporate Tax on Profitability of Business Organizations in Nigeria
Nnubia, Innocent Chukwuebuka & Okolo, Marvis Ndu
Department of Accountancy, Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus
Department of Accountancy, University of Nigeria, Enugu Campus, , Nigeria
Email: nnubiae@yahoo.com & marvisokolo@yahoo.com
ABSTRACT: The study investigates the effect of corporate tax on profitability of business organizations in Nigeria from 2011-2015. The study has three specific objectives to achieve, three research questions that guided the study and three hypotheses were formulated. The study used ex-post facto research design. Five banks were selected from the Nigerian Stock Exchange (NSE). Ordinary Least Square (OLS) stated in the form of multiple regressions was used to analyze the data collected. The study revealed that for the Nigerian listed banks, the three explanatory variables have positive significant effect on the dependent variables – Return on Assets and Return on Equity (Profitability). That is, (i) Marginal Tax Rate (MTA) has a strong positive effect on profitability, (ii) the more the Effective Tax Rate (ETR) increases the better the profitability of quoted banks in Nigeria, and (iii) the more Average Tax Rate (ATR), the higher the possibility of better profitability of the listed banks in Nigeria. The study, therefore, recommends that in carrying out tax decision, banks must deploy and properly measure effect of variables like marginal tax rate, effective tax rate and average tax rate on profitability (ROA and ROE) of the firms.
Keywords: Marginal Tax Rate, Effective Tax Rate, Average Tax Rate, Profitability.
