Impact of Tax Aggressiveness on the Profitability of Industrial Goods Firms in Nigeria.

This study examined the impact of tax aggressiveness on the profitability of industrial goods firms in Nigeria over the period 2012–2024. Tax aggressiveness was proxied by effective tax rate, cash effective tax rate, book–tax difference, and leverage, while profitability was measured using return on assets. The study adopted an ex post facto research design and relied on secondary data obtained from the audited annual reports and financial statements of industrial goods firms listed on the Nigerian Exchange Group. Panel data regression techniques were employed for data analysis, with the Hausman specification test indicating the suitability of the random effects model. The empirical results revealed that effective tax rate had a positive and statistically significant effect on return on assets, suggesting that higher profitability is associated with greater tax compliance and earnings capacity rather than aggressive tax minimization. Cash effective tax rate exhibited a positive but statistically insignificant relationship with profitability, indicating that variations in cash tax payments did not materially influence firm performance. Book–tax difference was found to have a positive and statistically significant effect on profitability, implying that legitimate tax planning practices, such as capital allowances and depreciation differences, enhanced firm performance in the industrial goods sector. Leverage also showed a positive and statistically significant effect on return on assets, highlighting the role of debt financing and tax shield benefits in improving profitability when optimally managed. The study concludes that tax aggressiveness has mixed effects on profitability of industrial goods firms in Nigeria, with compliant tax behavior, effective tax planning, and prudent use of leverage contributing positively to firm performance. The study recommends that industrial goods firms adopt moderate and transparent tax planning strategies and maintain optimal capital structures to enhance profitability, while policymakers should strengthen tax oversight without discouraging productive investment