Effect of Taxation on Financial Performance of the African Aviation Industry

Abstract

The African Airline Association recently reported that high airport charges and taxes are responsible for suppressing the evolution, development and growth of the African aviation industry. Therefore, the purpose of the study is to determine whether taxation metrics – tax planning, tax burden and after-tax earnings impact the financial performance of the African aviation industry, using the regression of various financial performance measures – profitability, liquidity, and going concerned. The panel data methodological approach was applied in this study. Descriptive statistics, correlation techniques, Hausman test, regression analysis and Granger Causality test result were presented. The study shows a positive relationship between tax planning and profitability, a positive relationship between tax burden and liquidity, and a positive relationship between tax charge and tax profits. This study concludes that taxation affects firms' financial performance in the African aviation industry.