THE IMPACT OF COMPANY INCOME TAX (CIT) ON THE PROFITABILITY OF MANUFACTURING FIRMS

This study examines the impact of Company Income Tax (CIT) on the profitability of manufacturing firms, with particular focus on the Nigerian manufacturing sector. The manufacturing industry serves as a critical driver of economic growth and employment, yet faces significant challenges from tax obligations that potentially constrain profitability and investment capacity. The research adopts a longitudinal research design, utilizing secondary data from annual reports of quoted manufacturing companies in Nigeria spanning 2017 to 2023. The study employs panel regression analysis to evaluate the relationship between CIT payments and profitability metrics including Return on Assets (ROA), Return on Equity (ROE), and Return on Investment (ROI). The findings reveal that company income tax has a statistically significant negative impact on profitability, consistent with theoretical expectations that tax obligations reduce distributable earnings. However, the research also identifies that tax planning strategies, accelerated capital allowances, and policy interventions such as the Finance Act 2020 can moderate this negative effect. The study contributes to the literature by providing empirical evidence on the tax-profitability nexus in the manufacturing sector and offers practical recommendations for policymakers and corporate managers. Key recommendations include the simplification of tax incentive administration, tying tax relief to measurable performance outcomes, and enhancing corporate tax planning capabilities to optimize tax efficiency while maintaining compliance.

Keywords: Company Income Tax, Profitability, Manufacturing Firms, Tax Planning, Financial Performance, Nigeria