Determinants of Corporate Actual Cash Taxes Paid: A New Insight from Nigeria

Authors

  • Etumudon Ndidi Asien

Abstract

This study examines the hypotheses that revenues, profitability, intangible assets, and percentage of foreign shareholdings, external auditors, tax haven status and firm size do not associate with corporate actual cash taxes paid.  The main results of pooled OLS multivariate regression suggest that revenue, intangible assets, and percentage of foreign shareholdings are directly and significantly associated with corporate actual cash taxes paid.  In particular, revenues, intangible assets, and percentage of foreign shareholdings are found to increase corporate actual cash taxes paid, thereby leading to conservative tax planning schemes that reduce tax avoidance. The result also suggests that Big-4 accountancy firms, tax haven status and firm size are negatively and significantly associated with corporate actual cash taxes paid. Consequently, it is recommended that the Federal Inland Revenue Service should monitor the revenue and intangible assets of companies through their annual fillings. Another recommendation is that relevant government agencies should encourage foreign equity participation in Nigerian companies.  Finally, they should collaborate to provide policy changes that would increase the participation of Non-Big-4 accounting firms in auditing companies’ financial statements in Nigeria.

References

Adams, S. O. & Balogun, P. O. (2020). Panel data analysis on corporate effective tax rates of some listed large firms in Nigeria. Dutch Journal of Finance and Management, 4(2), 1-10. https://doi.org/10.21601/djfm/9345.

Adekoya, A. A., Oyebamiji, T. A., & Lawal, A. B. (2020). Forensic accounting, tax fraud and tax evasion in Nigeria – Review of literatures and matter for policy consideration. International Journal of Emerging Trends in Social Sciences, 9(1), 21-28.

Annuar, H. A., Salihu, I. A. & Sheikh Obid, S. N. (2014). Corporate ownership, governance and tax avoidance: an interactive effects. Procedia-Social and Behavioral Sciences, 164, 150-160.

Asien, E. N. (2021). Firm-level characteristics as determinants of tax havens and tax haven share: Nigerian evidence. African Journal of Accounting, Economics, Finance and Banking Research, 14(14), 27-50

Asien, E. N. (2020). The influence of foreignness in engaging audit firms: An analysis under beps regime. African Journal of Accounting, Economics, Finance and Banking Research, 13(13), 29-45.

Asien, E. N. (2012). It is not “earnings management” if it is not earnings management: An epistemological dialectic. Journal of Theoretical Accounting Research, 8(1), 73-84.

Ball, R. (2009). Market and political regulatory perspectives on the recent accounting scandals. Journal of Accounting Research, 47(2), 1-47.

Bernard, J. & Weiner, R. (1990). Multinational corporations, transfer prices, and taxes: evidence from the U.S. petroleum industry. NBR.org. Www.nber.org/chapters/c7207.

Chen, S., Chen, X., Chen, Q. & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 95(1), 41-61.

Cohen, J., Cohen, P., West, S. G. & Aiken, L. S. (2003). Applied multiple regression correlation analysis for the behavioral sciences, (3rd ed.), Lawrence Ealbaum Associates, New Jersey.

Dowds, J. (1995). The contemporaneous movement between cash flow and accrual-based accounting numbers: The New Zealand evidence. Unpublished doctoral thesis, Massey University, New Zealand.

Dyreng, S., Hanlon, M. & Maydew, E. L. (2008). Long run corporate tax avoidance. The Accounting Review, 83, 61-82.

Eichfelder, S. & Hechtner, F. (2018). Tax compliance costs: Cost burden and cost reliability. Public Finance Review, 46(5), 764-792.

Elemes, A., Blaylock, B. & Spence, C. (2021). Tax-motivated profit shifting in big 4 networks: Evidence from Europe. Accounting, Organizations and Society. Forthcoming, 1-18.

Foster, B. J. & Ward, T. J. (2007). The incremental usefulness of income tax allocations in predicting one-year-ahead future cash flows. The Journal of Applied Business Research, 23(4), 37-44.

Garcia-Bernardo, J., Jansky, P. & Tørsløv, T. (2019). Multinational corporations’ effective tax rates: Evidence from Orbis. IES Working papers 20/2020. IES FSV. Charles University, Prague: 2-36. Downloaded from http://ies.fsv.cuni.cz. Accessed on 14 August 2021.

Ghodbane, W., Sangdal, D. & Abdennebi, H. (2021). The use of tax havens by MNEs in business clusters: A cross-country and firm-level analysis. European Journal of Business and Management Research, 16(4), 176-187.

Grubert, H. & Slemrod, J. (1998). The effect of taxes on investment and income shifting to Puerto Rico. Review of Economics and Statistics, 80(3), 365-373.

Hair, J. F., Black, W. C., Babin, B. J. & Anderson, R. E. (2009). Multivariate Data Analysis, (7th ed.), Prentice Hall, New Jersey.

Hines, J. R. (2010). Treasure Islands. Journal of Economic Perspectives, 24(4), 103-126.

Janský, P. & Palanský, M. (2019). Estimating the scale of profit shifting and tax revenue losses related to foreign direct investment. International Tax and Public Finance, 26(5), 1048-1103.

Jones, C., Temouria, Y. & Cobham, A. (2018). Tax haven networks and the role of the big 4 accountancy firms. Journal of World Business, 53, 177-193.

Lennox, C., Lisowsky, P. & Pittman, J. (2013). Tax aggressiveness and accounting fraud. Journal of Accounting Research, 51(4), 1-40.

Lisowsky, P. (2010). Seeking shelter: Empirically modeling tax shelters using financial statement information. The Accounting Review, 85(5), 1693-1720.

Mocanu, M. C., Sergiu-Bogdan, C. & Răileanu, V. (2021). Determinants of tax avoidance: Evidence on profit tax-paying companies in Romania. Economic Research, 2-21. https://doi.org/10.1080/1331677X.2020.1860794

Römgens, I. & Steinweg, T. (2016). Research Methodology: Calculating the effective tax rates of large Dutch companies and identifying tax avoidance, SOMO, Amsterdam.

Salaudeen, Y.M. & Ejeh, B.U. (2018). Equity ownership structure and corporate tax aggressiveness: the Nigerian context. Research Journal of Business and Management, 5(2), 90-99. Http://doi.org/10.17261/Pressacademia.2018.828.

Sikka, P. & Hampton, M. P. (2005). The role of accountancy firms in tax avoidance: Some evidence and issues, Working Paper, University of Essex, UK.

Slemrod, J. & Wilson, J. D. (2009). Tax competition with parasitic tax havens. Journal of Public Economics, 93, 1261-1270.

Stolowy, H. (2004). Earnings manipulation: A literature review and proposed conceptual framework. Review of Accounting and Finance, 3(1), 5-92.

Tijjani, B. & Zachariah, P. (2020). Ownership structure and tax planning of listed firms: Evidence from Nigeria. Journal of Accounting and Taxation, 12(3), 99-107.

Watts, R. L. & Zimmerman, J. L. (1990). Positive accounting theory: A ten year perspective. The Accounting Review, 65(1), 131-156.

Zimmerman, J. L. (1983). Taxes and firm size. Journal of Accounting and Economics, 5, 19-149. https://doi.org/10.1016/0165-4101(83)90008-3

https:www.gsk.com.media. Accessed on 22 January 2022.

Downloads

Published

2022-04-30

Issue

Section

Articles