TAX PLANNING AND FIRMS PERFORMANCE IN NIGERIA.

Abstract

Inability of tax payers to plan their taxes lead to high tax liabilities. Companies in an attempt to avoid tax, end up paying more than what is statutorily required to tax fraudsters because they lack adequate knowledge of tax planning. It is against this background that this work examined the impact of tax planning on firms’ performance of listed companies in Nigeria. The research adopted survey and expost-facto design. Financial statements of selected companies from Manufacturing, banking and insurance sectors, between 2003 and 2012 were analyzed. The population of the study is 240 listed companies on the Nigerian Stock Exchange market as at April, 2012. Using simple and stratified sampling techniques, fifteen companies were sampled for the study, five companies from each of the sectors under study. The hypothesis for the study states that tax planning has no significant effect on firms’ performance, the result indicate that tax planning exerts insignificant positive effect on reported earnings ( P - val = 0.199 > 0.05). R2 = 0.515, which means that 51.5% of change in reported earning can be attributed to timing effect, information content and tax liability. The study therefore concluded that tax planning has no significant effect on firms’ performance. It was recommended that there should be enlightenment of various tax payers on the need for voluntary compliance and that specialisation should also be encouraged in the work of tax advisers.