Tax Planning Strategies and Profitability Management in Nigerian Commercial Banks

This study examines the tax planning strategies adopted by commercial banks in Nigeria and their influence on profitability management. Commercial banks face a complex array of tax obligations including companies income tax, tertiary education tax, and withholding tax on interest income, creating incentives for sophisticated tax planning. However, the boundaries between legitimate planning and aggressive avoidance have increasingly attracted regulatory scrutiny. Using a mixed-methods design, the study combines analysis of audited financial statements from ten tier-one and tier-two banks over a five-year period with in-depth interviews of fifteen tax and finance directors drawn from banks across Lagos, Port Harcourt, and Abuja. The study assesses effective tax rate management, deferred tax strategies, capital allowance optimisation, and compliance with IFRS tax disclosures. Quantitative data are analysed using panel regression, while interview data are coded thematically. The study expects to find that banks with dedicated tax departments achieve measurably lower effective tax rates through optimised capital allowance claims and use of approved tax reliefs. Findings also anticipate that the introduction of the global minimum tax framework creates new compliance pressures for internationally active banks. Recommendations include establishing internal tax governance committees within bank boards, proactively engaging with FIRS on uncertain tax positions, and investing in transfer pricing documentation for intragroup transactions. Keywords: tax planning, commercial banks, profitability, effective tax rate, compliance.