IFRS Adoption and Taxation in Nigeria: Evidence Manufacturing Companies

Abstract

This study examined the effect of IFRS adoption on manufacturing companies’ tax payable from 2012 to 2021. Data gathered from the annual reports of fifty selected Nigerian listed companies were scrutinized employing PPMC and panel data methodology to quantify the effect of IFRS adoption on tax payable. It revealed that Profit before tax (PBT) caused a positive and significant effect on TAXATION, whereas Depreciation (DEPR), Shareholders’ Funds (SHDFUD), Long-term debt (LGTDEBT), and Non-current Asset (NONCURASET) impacted on TAXATION negatively. This showed that a surge in DEPR, SHDFUD, LGTDEBT and NONCURASET diminished TAXATION in manufacturing companies. Conclusively, IFRS adoption significantly downplayed manufacturing companies’ tax payable because organizations circumspectly and lawfully circumvent or reduce the tax payable through depreciation claimed on existing assets, the procurement of new non-current assets, and long-term debt (leverage). It is advocated that there should be monitoring mechanism devices put in motion by the government to monitor procurement by companies, impairment of assets and debts acquired transparently, in order to deter the unnecessary and artificial reduction in tax payable.