ABSTRACT

The study examined corporate tax planning and financial performance of listed consumer goods firms in Nigeria. To achieve the objective of the study, ex-post facto research design was adopted. The population of the study is made up of 21 consumer goods firms listed in Nigeria exchange groups while sample size is made of 14 listed firms after adopting judgmental sampling for the period 2012-2022. Data were sourced from annual report and accounts of the selected firms. The data collected were analyzed using multiple regression analysis and moderated regression analysis (MRA). The findings revealed that (i) Effective tax rate has an insignificant effect on return on asset of listed consumer goods firms in Nigeria. (ii) Tax incentives and exemption do not significantly affect return on asset of listed consumer goods firms in Nigeria. (iii) Effective tax rate does not have any significant effect on earnings per share of listed consumer goods firms in Nigeria. (iv) Tax incentives and exemption significantly affect earnings per share of listed consumer goods firms in Nigeria. (v) Debt tax shield insignificantly moderate the association between corporate tax planning and return on asset of listed consumer goods firms in Nigeria. (vi) Debt tax shield insignificantly moderate the association between corporate tax planning and earnings per share of listed consumer goods firms in Nigeria. Based on the findings, the study recommended that management of consumer goods firms must do an extensive analysis of the costs and benefits associated with tax planning such as effective tax rate before engaging in the activities. These include the tax savings benefit from tax planning, cost of executing the strategy, the risk of detection by the tax authorities and the penalty that may be imposed by the authority. Failure to do so will have a negative effect on return on asset of consumer goods firms in Nigeria. The study also recommends that consumer goods firms should do a proper capital structure evaluation to know whether debt financing is more profitable to their business considering the fact that debt financing has the advantage of reducing tax payment. In some cases, irrespective of the advantage of debt financing towards tax planning, equity financing can be more profitable to the business. Therefore, lack of proper evaluation of firm’s capital structure before adopting debt financing could cause more harm to the company than reducing tax rate.