DETERMINANTS OF  CORPORATE TAX AGGRESSIVENESS IN NIGERIA MANUFACTURING SECTOR
ABSTRACT
The broad objective of this research paper was to investigate the determinants of corporate tax aggressiveness in Nigeria manufacturing sectors. The specific objectives were: to investigate if there is any significant relationship between tax aggressiveness and firm size, corporate profitability, long term debts and multinationality. The sample for the study was made up of companies quoted on the Nigeria Stock Exchange. This research used secondary data and model specification based on regression. The student t-test was the statistical technique used in testing the hypotheses.
The findings of this research showed that there is a positive, negative,  positiveand  positiverelationship between Firm size, Corporate profitability, Long term debt and Multinationality respectively, and Tax aggressiveness.
Based on the findings, there should be improved Tax administration system, principle,
regulations so that, companies won't take advantage of loopholes.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background of The Study    
1.2    Statement of the Research Problem    
1.3    Research Questions     
1.4    Objective of the Study    
1.5    Research Hypothesis    
1.6    Scope of the Study    
1.7    Significance of the Study    
1.8    Limitations of the Study    
CHAPTER TWO: LITERATURE REVIEW
2.1    Introduction    
2.2    Conceptual Framework     
2.2.1    Review of the concept of Tax and Tax Aggressiveness     
2.2.2 The Role of Tax to Government     
2.2.3 Role of Tax to Business     
2.2.4 Challenges of Dealing with Tax Aggressiveness     
2.2.5 Manufacturing Industry in Nigeria     
2.2.6 Forms of Tax Aggressiveness     
2.2.7 Consequences of Tax Aggressiveness     
2.2.8  Prevention of Tax Aggressiveness     
2.3     Review of Prior Empirical Literature on Study     
2.4.    Review of Related Literature on Variables     
2.4.1 Corporate Profitability     
2.4.2 Total Debt     
2.4.3 Firm Size     
2.4.4 Multinationality    
2.5    Review of Relevant Theories     
2.5.1 Stakeholder Theory    
2.5.2 Institutional Theory        
2.6    Establishing Gap in Literature     
2.6.1    No Unique Theory to Explain Tax Aggressiveness Behaviours    
CHAPTER THREE: METHODOLOGY
3.1 Introduction    
3.2 Research Design of the Data Analysis     
3.3 The Population and Sample    
3.4 Source of Data     
3.5 Data Analysis Method     
3.6 Model Specification    
3.7 Operationalization of Variables    
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1    Introduction    
4.2    Descriptive statistics    
4.3    Correlation Analysis    
4.4    Regression Analysis and Hypothesis Testing     
4.4.1 Hypothesis 1    
4.4.2 Hypothesis 2    
4.4.3 Hypothesis 3    
4.4.4 Hypothesis 4    
CHAPTER FIVE: SUMMARY OF FINDINGS, CONLUSION AND RECOMMENDATION
5.1 Introduction    
5.2 Summary of Findings    
5.3 Recommendation     
5.4 Conclusion         
5.5 Bibliography     
CHAPTER ONE
INTRODUCTION
Background to the Study
Taxes are the major contributor to the government's revenue and it becomes an important issue in every country. Therefore, in maximizing shareholders' wealth company tries to minimize its tax burden. Shareholders would like management to minimize corporate tax payments in other to maximize the firm value (Hanlon and Slemrod, 2007). The maximization of tax payment is called tax aggressiveness, sometimescalled tax avoidance or tax planning (Guodong Yuan, 2014).
Tax aggressiveness is defined by Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010), as a downward management of taxable income through tax planning with respect to reducing tax paid to tax authority. In Nigerian context, example of tax planning activities includes excessive claim of tax reliefs or claiming relief which company are not entitled to, finding a gap(loopholes in the tax system), exploiting (or abusing) a relief, unnatural assets or transactions, pre- ordained transactions, dodgy offshore schemes etc. Furthermore, company may also claim unallowable expenses which are not allowed by income tax act. Tax planning is part of the overall business planning aimed at reducing explicit and implicit taxes (Franca et al 2015). According to Scholes-Walfson (2015), effective tax planning considers the tax positions of all parties in a contract (multilateral approach), considers all taxes, both explicit and implicit: and recognises the relevance of all costs, both tax and non- tax costs.
Tax planning practices may lead to the reduction of tax obligations depending on the intensity and legality in how these practices are adopted. The degree of tax aggressiveness pragmatically materializes in the magnitude of the reduction of explicit taxes. This approach is in line with Halon and Heitzmann's (2010) definition, which emphasizes that actual tax abatement activities and actions that are purposefully undertaken to avoid tax and/or tax benefit payment help to define tax aggressiveness. It should be emphasized that a priori, in this definition, no distinction is made between clearly legal, legally dubious or "gray scales", illegal and truly fraudulent practices.
The most aggressive entity when making a transaction assures that, on each occasion, the option that permits minimizing taxes is used. When structuring its transactions, the entity will always look for the forms and alternatives that guarantee the greatest tax savings. In certain situation, this conduct may assume legally dubious positions and which in the eyes of the tax authority may be interpreted, although legitimate in form, as abusive. The pursuit of greater tax aggressiveness does not necessarily imply tax abusiveness, but there is a risk that, in the deliberate reduction of explicit tax obligations, the entity adopts measures that abuse the law, fraud of law, or that the legal substance contradicts the legal form.
Abusive tax planning should not be confused with tax evasion, due to the clear illegality of the later. The former is potentially subject to questioning by the tax authorities though, for having potentially materialized through anomalous business deals or tax avoidance. Thus, not all aggressive fiscal planning is necessary abusive, the final prognosis will depend on the perspective of who appreciates the tax transaction and whether it finds support in the legislation.
The degree of tax aggressiveness measures the impetus of the tax payer to reduce his tax burden in explicit taxes, without any restrictions as to the legality of the procedures according to the standards in force (Antonio Lopo Martinez, 2017). By hypothesis, as the degree of tax aggressiveness increases, the fiscal risk increases that the tax authority will disregard transactions in their tax dimensions. Tax aggressiveness, despite being distinct concepts, are positively correlated because they increase in the direction. Since tax aggressiveness is a form of corporate decision and action that could reflect both executives and non-executive’s aversion to risk, it presents a suitable setting to assess it's determinant.
However, tax aggressiveness does not always maximize firm value, as it may result in large outlays (following a tax audit), and it may damage the firm's reputation as well. Abudlrazag (1997) and oats (2005) have confirmed that tax avoidance is generally considered a legal practice against tax evasion. Thus, Killian and Kolitz (2005) have concluded that tax avoidance is a legal practice because tax legislation is often open to interpretation. The complexity of tax legislation often lies in the diversity of interpretations that sometimes contradict with the spirit of the law. Indeed, studies by Sikka (2007) have confirmed that various interpretation of the tax law letter are the tax avoidance source. The work of Duff (2009) also showed that some forms of tax avoidance are clearly acceptable while others remain ambiguous. Although some highly sophisticated optimization techniques designed to reduce the tax burden, and they could be considered an illegal activity. Alm (1990) found that tax avoidance can take various legal and Illegal forms, while it is influenced by the incentives created by tax system.
1.2     Statement of Research Problem
Tax has been a powerful instrument of revenue generation to the government in Nigeria of which tax aggressiveness is a major problem that obstructs the collection of tax.
Nigeria have started the new era of tax assessment by the implementing a self-assessment system on companies in 1992, following the enactment of the appropriate law in 1991. By implementation of self- assessment system, tax payer is granted the right, by law to compute own tax liability, pay the tax due (at the designed bank) and produces evidence of tax paid at the time of filling his tax return at the tax office, on due date. Self- assessment system has opened a new agenda to company in planning their tax activities. In Nigeria, government takes 30 percent of company's profit as corporate tax.Thus, tax aggressive practices are usually implemented to minimize tax burden to achieve greater after tax earnings per share and cash available for shareholders. Therefore, tax aggressiveness may have a significant tax implication because it possibly leads to tax evasion. The consequences of tax aggressiveness results in loss of revenue to the nation and affect public spending. Tax aggressiveness reduces the government's revenue (Chen et al.,2010) and it represents a value maximizing activity for the firm. It is a transfer of wealth from government to the firm's stakeholders (khurana & maser, 2009). So, it's considerable as taxes loss to the government.
Prior research carried out in this topic area by Herbert Tanja (2015), found that firm size, profitability, income mobility, R&D and leverage are determinant of tax aggressiveness. Hence, this study therefore, intends to critically evaluate some factors that could determine tax aggressiveness of quoted companies listed in the Nigerian stock exchange. It also wishes to complement the limitations of prior study on determinant of corporate tax aggressiveness using the ordinary least square technique of data analysis (regression) method, while taking into cognizance the currentness of data to be used.
1.3.   Research Questions
This study proposed the following research questions:
i. What is the relationship between profitability and tax aggressiveness?
ii. Is there any relationship between firm size and tax aggressiveness?
iii. What is the relationship between debts and tax aggressiveness?
iv. What is the relationship between multinationality and tax aggressiveness?
1.4.    Objective of the Study
The major objective of this study is to examine the determinants of tax aggressiveness in Nigerian manufacturing companies. The specific objectives of the study are:
i. To examine the relationship between profitability and tax aggressiveness.
ii. To examine the relationship between debts and tax aggressiveness.
iii. To examine the relationship between firm size and tax aggressiveness.
iv. To examine the relationship between multinationality and tax aggressiveness.
1.5    Research Hypotheses
To formally test the impact of the determinants of tax aggressiveness in manufacturing companies in Nigeria, the following null hypothesis are developed:
i   There is no significant relationship between profitability and tax aggressiveness.
ii.  There is no significant relationship between debts and tax aggressiveness.
iii. There is no significant relationship between firm's size and tax aggressiveness.
iv. There is no significant relationship between multinationality and tax aggressiveness.
1.6.   Scope of the Study
This study focuses on 64 Manufacturing industry in Nigeria. Data for this study will be obtained from the Nigerian stock exchange fact books and companies financial report for the period of 2012 to 2016. The focus on the quoted companies was necessitated, by the notion that the stakeholders of the company in a given nation dictates the pace of their economic growth. This study therefore seeks to identify the factors which determine tax aggressiveness in firms quoted in Nigeria.
1.7.    Significance of the Study
This study examines the determinants of tax aggressiveness in manufacturing companies in Nigeria. Therefore, it will provide useful information to the tax authority in understanding more about tax aggressiveness in manufacturing companies.
Furthermore, the study will add to the existing literature on the issues surrounding tax aggressiveness in Nigeria manufacturing companies. Also given the empirical nature of the study, the study outcome would aid policy makers in making decisions with respect to the selected variables examined in the study and also help firms in the identification of important areas while carrying out tax aggressiveness.
1.8.   Limitation of the Study
Most of the data used in this study where obtained from secondary sources, the possibility of corporate and government influence on such data cannot be ruled out. Also, restriction in accessing certain materials on the internet and the Nigerian stock exchange, the issue of sample size were also constraints. However, it is hoped that, they would not bring much deviation between this study and what obtains in real life situations.