For correspondence:-
Received: June 2, 2020 Accepted: June 22, 2020 Published: 26 June 2020
Citation: Tax planning and Profitability of Nigerian Deposit Money Banks: Evidence from Dynamic Panel Model. Account Tax Rev 2005; 4(2):162-169 doi:
© 2005 The authors.
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Abstract
Corporate tax represents the transfer of wealth from corporate entities to the government. It is a veritable source of revenue generation to the government while it is a burden on corporate entities. Therefore corporate entities are always reluctant in its payment while government forcefully collects it from their profit. Amidst this divergence is the examination of corporate tax planning and profitability of Nigerian listed deposit money banks. The study adopted an ex post facto research design by obtaining relevant data of sampled 9 banks from 2012 to 2018 from their annual financial statements. Findings from the study show that tax planning (effective tax rate) has a significant negative effect on profitability. The study further found a significant positive effect of capital adequacy ratio as a control variable on profitability. However, no evidence of the negative effect of bank age and bank size on profitability is established by the study. The study, therefore, concludes that tax planning has a significant negative effect on the profitability of Nigerian deposit money banks. Going by the findings from the study, it is recommended that money deposit banks should engage the services of a tax consultant and also make use of a reasonable level of debt in their overall capital structure so as to reduce their tax burden and ultimately improve their profitability.
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