Abstract
Corporate tax burden is a significant determinant of business profitability, investment decisions, and long-term corporate sustainability. It represents the proportion of a company's earnings that is paid as taxes to the government through corporate income tax and other statutory tax obligations. Taxation remains one of the primary sources of government revenue for financing public infrastructure, social services, and economic development. However, the level of corporate tax burden imposed on businesses has important implications for firms' operational efficiency, cash flow, investment capacity, competitiveness, and profitability. In Nigeria, listed companies are subject to various tax obligations, including Companies Income Tax (CIT), Tertiary Education Tax, Capital Gains Tax, Value Added Tax (VAT) obligations on behalf of government, withholding tax provisions, and other statutory levies administered by the Federal Inland Revenue Service (FIRS). Although taxation provides government with the financial resources required to support national development, excessive tax burdens may reduce corporate earnings, discourage investment, constrain business expansion, increase production costs, and weaken firms' financial performance. Conversely, an efficient and equitable tax system may enhance voluntary tax compliance, improve investor confidence, and support sustainable economic growth. In recent years, Nigeria has introduced several tax reforms aimed at broadening the tax base, improving tax administration, and creating a more business-friendly environment. Despite these reforms, concerns remain regarding the impact of corporate tax burden on the profitability of listed companies. Although previous studies have examined corporate taxation and firm performance, empirical evidence regarding the effect of corporate tax burden on the profitability of listed companies in Nigeria remains limited and inconclusive. Against this background, this study investigates the effect of corporate tax burden on the profitability of listed companies in Nigeria. The study is anchored on Benefit Theory of Taxation, Trade-Off Theory, and Agency Theory. Benefit Theory of Taxation posits that firms contribute taxes in exchange for public goods and services that facilitate business operations and economic development. Trade-Off Theory argues that firms balance the costs associated with taxation against the benefits of government-provided infrastructure and a stable business environment while seeking to maximize profitability. Agency Theory explains that managers are expected to make prudent tax planning decisions that optimize corporate profitability while ensuring compliance with statutory tax obligations and safeguarding shareholders' interests. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between corporate tax burden and the profitability of listed companies in Nigeria. The study adopts an ex post facto research design utilizing secondary data obtained from the audited annual reports and financial statements of companies listed on the Nigerian Exchange Group (NGX). A longitudinal panel data approach covering a ten-year period will be employed to examine the relationship between corporate tax burden and profitability over time. Purposive sampling will be used to select listed companies with complete and consistent financial information throughout the study period. Corporate tax burden will be measured using effective tax rate, total tax expense, tax-to-profit ratio, current tax expense, and tax payments relative to earnings before tax, while profitability will be measured using Return on Assets (ROA), Return on Equity (ROE), Net Profit Margin (NPM), Earnings per Share (EPS), Profit After Tax (PAT), Return on Capital Employed (ROCE), and Gross Profit Margin (GPM). Data analysis will involve descriptive statistics to summarize the characteristics of the study variables, correlation analysis to determine the degree of association among variables, and panel regression techniques, including Fixed Effects and Random Effects models, to estimate the effect of corporate tax burden on profitability. The Hausman specification test will determine the most appropriate estimation model, while diagnostic tests including multicollinearity, heteroskedasticity, autocorrelation, stationarity, cross-sectional dependence, endogeneity, normality, and model specification tests will be conducted to ensure the validity, consistency, and robustness of the empirical findings. The study anticipates that corporate tax burden will have a significant effect on the profitability of listed companies in Nigeria. A moderate and efficiently administered tax burden is expected to encourage business growth, improve regulatory compliance, enhance investor confidence, and promote sustainable profitability. Effective tax planning and efficient tax management are also anticipated to optimize cash flow, strengthen financial flexibility, improve operational efficiency, and enhance shareholder value. Conversely, excessive corporate tax burden may reduce retained earnings, increase operating costs, constrain capital investment, weaken competitiveness, and adversely affect corporate profitability. Furthermore, high tax obligations may discourage expansion, reduce innovation, and increase the financial pressures faced by listed companies operating in a challenging macroeconomic environment. Consequently, a balanced and transparent corporate tax system is expected to contribute significantly to improving profitability, investment performance, and long-term corporate sustainability among listed companies in Nigeria. This study is expected to make significant theoretical and empirical contributions to the literature on accounting, taxation, corporate finance, and public finance by providing comprehensive evidence on the relationship between corporate tax burden and the profitability of listed companies in Nigeria. Unlike previous studies that broadly examined corporate taxation or tax compliance, this research specifically evaluates corporate tax burden as a determinant of profitability using a longitudinal panel data approach and multiple indicators of taxation and financial performance. The findings will provide valuable insights for the Federal Inland Revenue Service (FIRS), the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), the Nigerian Exchange Group (NGX), listed companies, investors, tax practitioners, professional accounting bodies, policymakers, and academic researchers regarding the implications of corporate taxation for business profitability and sustainable economic development. The study will also provide evidence-based recommendations for strengthening tax policy formulation, improving tax administration, promoting efficient corporate tax planning, enhancing voluntary tax compliance, reducing unnecessary tax burdens, and fostering a more competitive business environment in Nigeria.
Keywords: Corporate tax burden, profitability, listed companies, effective tax rate, corporate income tax, panel regression, Nigerian Exchange Group (NGX), tax planning, corporate finance, Nigeria.
