The moderating effect of profitability on the relationship between ownership structure and corporate tax avoidance in Nigeria listed consumers goods firms

The study examined the moderating effect of profitability on the relationship between ownership structure and corporate tax avoidance of listed consumers’ goods firms in Nigeria. Ownership structure was proxies by managerial ownership, institutional ownership and foreign ownership, tax avoidance was measured by GAAP effective tax rate while profitability was measured by return on assets (ROA). Secondary data was extracted from the sampled firm annual report and accounts. The data were analysed using Generalized Least Square (GLS). The study revealed a negative and insignificant relationship between institutional ownership and corporate tax avoidance. Similarly, the moderating effect of ROA on foreign ownership encourages tax avoidance. The study recommended that tax authorities should carry out stringent tax audit and investigate the activities of firms to ensure that tax avoidance of firms is within the armpit of tax law. If this is done, it will help to know if firms are paying the actual taxes they supposed to pay or not. The study also recommends that government should review the provisions for tax allowances and relief granted to corporate entities because most of the firms reported losses in some years in order to take advantage of loss relief while other purchase non-current to enjoy capital allowances. If this is done it will enhance government revenue generation through tax and increase GDP via tax-revenue. The study contributes to the existing knowledge in two ways. First, the practical contribution is that the major finding of the study implies that high profitability encourages foreign investors to invest in Nigeria firms. Second, the theoretical contribution is that the study adds to the existing literature on tax avoidance by considering the moderating effect of profitability because no study used profitability study moderating effect.