Assessing the Effects of Corporate Taxation on the Investment Policy of Manufacturing Firms in Nigeria

Abstract

Abstract Research Background: The complexities of taxes in business have a tendency of endangering investment decisions at every point in time, if such complexities are not strategically managed. Purpose: This study therefore assesses the effect of corporate taxation on the investment policy of quoted manufacturing firms in Nigeria. Research Methodology: Secondary data sourced from annual reports of the selected firms were analysed using descriptive and inferential statistics. Specifically, static panel least square regression techniques were used. Result: The results of the study revealed that company income tax (CIT) is positively related to the investment decision of the quoted manufacturing firm (INV), and thus enhances the investment of the quoted manufacturing firm (INV) in Nigeria. The probability value revealed that company income tax (CIT) had a statistical significant correlation with the investment of the quoted manufacturing firm in Nigeria. This implies that higher corporate income taxes are associated with lower investment in manufacturing firms. Novelty: This study digressed from examining the effects of corporate tax on financial performance as that was the major focused area in this context. However, this study assessed its effect on investment decisions. Hence, this study was able to recommend that the Nigerian government should encourage and enhance manufacturing investment decision by designing an appropriate corporate income tax policy. An investment decision that is fostered on new capital, encourages the implementation of new production techniques and thus should be engineered for the development of manufacturing firms.