DOES COMPANIES’ INCOME TAX AND FINANCIAL LEVERAGE AFFECT PROFITABILITY OF QUOTED MANUFACTURING COMPANIES IN NIGERIA?

Researchers have continued to debate on the possibility of companies’ income tax affecting the earnings of companies without much concern for its link with financial leverage. This research evaluated the influence of companies’ income tax and financial leverage on manufacturing companies listed in Nigeria. Ex-post facto research design and population of 41 Nigerian manufacturing companies quoted on Nigerian Exchange (NGX) (2021) were adopted for the study. The sample size was 20 companies using stratified sampling and secondary data from audited published financial statements for ten years covering 2012 to 2021. Descriptive and inferential (regression) statistics were employed for the analyses of data. The findings revealed that companies’ income tax (CIT) had no significant effect on profitability with t-stat p=0.61, p>0.05 therefore accepting the null hypothesis; but financial leverage had significant effect on profitability with t-stat of 5.217 and p=0.000, p<0.05, hence null hypothesis is rejected; also both companies’ income tax and financial leverage had significant effect on profitability of quoted manufacturing companies in Nigeria with F-stat value of 18.96 and p=0.000; p<0.05; therefore null hypothesis is rejected. The study concluded that majority of the listed Nigerian manufacturing companies are operating on loan and companies’ income tax alone cannot significantly influence their profitability but it was possible with the inclusion of financial leverage. It recommended that government should review the tax policy so that companies’ income tax rate can be reduced, and improve infrastructural facilities deficiency. Key Words: Companies’ Income Tax; Financial Leverage; Profitability; Tax Rates; Tax policy and revenue