ABSTRACT
This study investigated the determinants of the variability in corporate effective tax rates (ETRs) in Nigeria. In specific terms, It examines the effects of several firm characteristics on the effective tax rates of fifty (50) non-financial firms listed in the Nigeria Stock Exchange using the micro-backward-looking approach. Furthermore, it analyses the effect of some firm characteristics on ETR using multinational and domestic firms as separate samples.
The data used in this study were extracted from the annual financial reports of selected companies and analysed using descriptive statistics, correlation analysis, and Ordinary Least Squares panel regression analysis for the data estimation.
The OLS panel regression analysis indicated that, for the entire sample, firm size (FMSZ), return on assets (ROA) and multinational corporation (MNC) are positively related to ETRs with MNC being significant. Leverage (LEV) on the other hand had a negative and insignificant relationship with ETR. The coefficient of leverage was negative for the MNCs while it was positive for the domestic firms, indicating that the debt level impacts the ETRs of MNCs. Furthermore, the relationships between ROA and ETR are negative for the MNCs and domestic firms respectively, indicating that the higher the profitability of the firm, the lower the ETR. However, though these determinants separately do not significantly impact on ETR, the results show that, acting in concert, they significantly explain changes in the ETRs of firms in Nigeria.
