Taxation and Corporate Performance in Nigeria’s Consumer Goods Firms: From Fiscal Burden to Strategic Asset

Abstract

This study re-examines the conventional wisdom that corporate taxation inherently diminishes financial performance. It investigates whether, in the volatile context of an emerging market, tax compliance can function as a strategic asset for listed consumer goods firms in Nigeria. Employing a longitudinal panel design, data was collected from 17 firms on the Nigerian Exchange Group from 2014-2023. The analysis measured the relationship between key tax proxies-Effective Tax Rate (ETR), Cash Effective Tax Rate (CETR), and Tax Savings were evaluated against Return on Assets (ROA) as the financial performance measure. The data was analyzed using a robust random effects regression model. The results reveal a significant positive relationship between both ETR and financial performance and CETR and financial performance. A positive relationship was also found for Tax Savings, though its effect was comparatively smaller. This indicates that a strategy of transparency and compliance may enhance profitability by reducing regulatory risk and securing operational legitimacy, outweighing the nominal cost of higher tax payments. This study makes a pivotal contribution by proposing a strategic compliance theory, challenging the universal applicability of the tax burden paradigm. It demonstrates that in institutionally complex environments, meeting tax obligations can be a value-driving strategy, offering critical insights for corporate governance and policy.