IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
Vol. 1 No.1, 2015

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Assessment of Tax Planning Practices and Reported Earnings on Financial Performance of Listed Firms in Nigeria

Ramon Adetola, Dada, Samuel Olajide & Olaoye, Samuel Adebayo

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Abstract

Most profit making organizations generally aim at maximizing benefit by minimizing their cost, without considering the social and legal implication of this. Nigerian companies are rigidly committed to traditional tax evasion and avoidance practices which are one of the reasons why the government is losing a huge amount of money to tax fraud each year. This calls for the need to examine how tax planning affect reported earnings of listed companies in Nigeria. This work adopts diffusion theory of taxation which was propounded by Everelt Rogers in 1995. The research adopted survey and ex-post-facto design. Financial statements of selected companies from manufacturing, banking and insurance companies 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. Simple and stratified sampling techniques were used to select fifteen companies for study. The hypothesis of the study states that timing effect has no significant impact on the reported earnings of organization. The result indicated that, the joint effect of timing effect on profit after tax is positive but insignificant (p value = 0.298 > 0.05). R2 = 0.498, which indicates that timing effect, information content and tax liability account for 49.8 % change in profit after tax. It was concluded that tax timing effect has no significant effect on reported earnings of listed companies in Nigeria. The paper therefore recommends that tax laws should be reviewed intermittently and tax payers should be made to have a deep understanding of it to apply it.

keywords:

Tax Planning, Earnings, Timing effect, tax evasion, listed companies

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