The Effect of Tax Planning on Profitability of Quoted Manufacturing Companies in Nigeria

Tax planning represents a legitimate corporate finance activity through which firms seek to minimise their tax liability within the boundaries of applicable law, thereby improving post-tax profitability and cash flow. This study examines the effect of tax planning activities on the profitability of quoted manufacturing companies in Nigeria, using secondary data from the financial statements of 25 listed manufacturers on the Nigerian Exchange Group for the period 2018 to 2022. Tax planning intensity is measured using effective tax rate deviations from the statutory corporate income tax rate, book-tax differences, and the recognition of deferred tax assets. Profitability is assessed through return on assets, return on equity, and earnings before interest and tax margins. Panel regression with fixed effects is applied to control for firm heterogeneity, and industry subgroups are analysed separately to detect sector-specific tax planning patterns. The theoretical framework draws on the trade-off theory of tax planning, agency theory applied to the manager-shareholder dynamic in tax decisions, and the more recent corporate tax aggressiveness literature. The study contextualises its findings against the backdrop of recent amendments to the Finance Act and their implications for manufacturing sector taxation. Existing literature confirms a positive relationship between tax efficiency and profitability, though aggressive tax planning introduces reputational and regulatory risks that may erode long-term value. Findings are expected to inform corporate finance functions, tax advisory firms, and the Federal Inland Revenue Service's compliance risk management framework for the manufacturing sector. Keywords: tax planning, profitability, manufacturing, effective tax rate, Finance Act Nigeria