Profit Squeeze From Tax Burdens: Evidence From Listed Consumer Goods Firms In Nigeria

Gilbert Nworie, Joseph Ogwu Elom, Godfrey Chinedu Nwambeke and Roseline Ngozi Nwuzor
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Joseph Ogwu Elom: Lecturer, Department of Accountancy, Ebonyi State University, Abakaliki, Nigeria. joemaxelom@gmail.com
Godfrey Chinedu Nwambeke: Lecturer, Banking and Finance Department, Ebonyi State University, Abakaliki, Nigeria. Gogfreynwambek@yahoo.com
Roseline Ngozi Nwuzor: Bursar, Ebonyi State University, Abakaliki, Nigeria. Roselinenwuzor@gmail.com

Journal of Taxation and Economic Development, 2025, vol. 24, issue 2, 1-17

Abstract: Despite the critical role consumer goods firms play in Nigeria's economy, many struggle to maintain profitability under increasing tax burdens. Excessive or poorly structured taxation may erode earnings, discourage reinvestment, and weaken long-term financial performance. Hence, this study investigated the profit squeeze resulting from tax burdens among listed consumer goods firms in Nigeria. Tax burden was measured using effective tax rate while return on investment was used in measuring firm profitability. Employing an ex post facto research design, the study examined a purposively selected sample of 12 out of 20 listed consumer goods firms over an 11-year period (2014–2024). Secondary data were sourced from published annual reports. In addition to the descriptive analysis carried out, tests of cross-sectional dependence and panel heteroskedasticity were conducted to assess the validity of the panel regression model. Hypothesis was tested using estimates from panel estimated generalized least squares (EGLS). The findings revealed that an increase in the effective tax rate significantly reduces firm profitability, with a negative effect on return on assets (coefficient = -0.001585, p-value = 0.000). The study concluded that rising tax burdens have a constraining effect on financial performance. The study therefore recommended that tax authorities and policymakers consider more growth-friendly tax regimes to enhance firm profitability and sectoral sustainability

Keywords: Consumer Goods Firms; Nigeria; Profit; Profit Squeeze; Tax Burdens (search for similar items in EconPapers)
Date: 2025
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