EFFECT OF VALUE-ADDED TAX ON PERFORMANCE OF MANUFACTURING FIRMS IN NIGERIA

Abstract The study examined the effect of corporate Value added tax on the of manufacturing industries in Nigeria. Objectives of the Study were to determine the effect of Value added tax on NPM, ROE, and Gross Profit Margin and identify the relationship between corporate Value added tax and profitability. The theoretical reviews of the study are the ability-to-pay theory, Walker's theory of profit, the innovations theory of profits. The ability-to-pay theory of taxation states that taxes should be levied based on income, with higher earners paying a larger portion. This theory aligns with the principle of progressive taxation, fairness, and equity. The innovations theory of profits explains that profits arise from successful innovations, either by reducing production costs or increasing product demand. These innovations are temporary as they are eventually imitated by competitors, leading to profit decline. Patents can extend this profit period. Walker's theory of profit, also known as the rent theory, views profit as a rent for an entrepreneur's differential ability compared to others. Similar to land rent, it's the difference between the least and most efficient "entrepreneurs." This theory suggests that profit depends on the uniqueness of an entrepreneur's skills and abilities. This research work utilizes a descriptive research design which is ex-post facto nature, relying on secondary data obtained after the occurrence of the event which the researcher has no control over. Both inferential and descriptive statistics are relied on to the Effect of value-added tax on the profitability performance of the manufacturing firms in Nigeria. Descriptive statistics helped to describe and understand the characteristics of the variables used in the study while inferential statistics assist in establishing a causal relationship between the variables of study namely: inventory and labour cost proxies and Profitability proxy. The complete set of elements on which the study is centered is referred to as the study's population. The population of this study was made up of the 32 manufacturing companies in Nigeria as of the 31 of December, 2022. The study found no statistically significant evidence that company Value added tax has an effect on NPM. Similar to NPM, the study revealed no statistically significant relationship between company Value added tax and ROE. Interestingly, the study found a negative relationship between company Value added tax and GPM, indicating that higher corporate taxes might lead to lower gross profit margins. However, this relationship was not statistically significant.