COMPARATIVE ANALYSIS OF TAX PLANNING STRATEGIES ON PROFITABILITY OF MANUFACTURING AND BANKING SECTORS IN NIGERIA

Abstract

This study undertakes a comparative analysis of tax planning strategies on profitability of manufacturing and banking sectors in Nigeria, focusing on effective tax rate (ETR), thin capitalization (TC), and capital intensity (CI). The objectives were to determine whether ETR management influences profitability across sectors, assess the effect of TC under Nigeria’s fiscal rules, examine the role of CI in shaping firm performance, and compare the differential sectoral effects of these strategies within a uniform regulatory environment. An ex-post facto design was adopted, using panel data from 20 listed firms (10 banks and 10 manufacturers) between 2015 and 2024. Data were sourced from audited annual reports, the Central Bank of Nigeria (CBN), and the Federal Inland Revenue Service (FIRS), with profitability measured by return on assets (ROA). Robust least squares regression was applied to address heteroskedasticity and serial correlation, while the Kruskal–Wallis test was employed for sectoral comparison. The findings revealed that ETR had no significant effect on manufacturing firms but exerted a negative and significant effect on banking profitability. Thin capitalization and capital intensity were not statistically significant for either sector, although descriptive evidence suggested modest benefits for manufacturers from capital investment. The joint analysis confirmed sectoral differences, underscoring that tax planning effectiveness is context-specific and shaped by regulatory structures. The study recommends sector-sensitive tax frameworks, refinement of thin capitalization rules, expansion of capital allowance schemes, stronger governance oversight, and further research incorporating transfer pricing, deferred tax positions, and institutional quality to extend tax planning theory in emerging economies