Assessing the influence of value added tax on corporate performance: evidence from International Breweries Plc, Nigeria
Keywords:
Value Added Tax, Corporate performance, Profit for the year, Return on capital employed, Return on investmentAbstract
This study investigated the effect of Value Added Tax (VAT) on the corporate performance of International Breweries Plc, Nigeria. The specific objectives were to examine the impact of VAT on profit for the year (PFY) and return on capital employed (ROCE). A quantitative research design was adopted, focusing on International Breweries Plc over the period 2012–2022. Secondary data were obtained from the company’s annual reports and financial statements. The study concentrated on a manufacturing firm due to the homogenous nature of organizations within the sector. Data analysis was conducted using descriptive statistics, correlation analysis, and Ordinary Least Squares (OLS) regression techniques.
The empirical findings reveal that VAT has a negative and significant effect on profit for the year (t-value = –4.4680; p = 0.001575 < 0.05) and a negative and significant effect on return on capital employed (t-value = –6.5494; p = 0.0001 < 0.05). Based on these findings, the study recommends that the government should further strengthen VAT administration and ensure that revenue generated from VAT is invested in essential social and infrastructural facilities. Such investment has the potential to stimulate economic growth, enhance investor confidence, and create employment opportunities in Nigeria.
References
Adegbite TA. Analysis of the effect of value added tax on household consumption expenditure in Nigeria. Int J Res Econ Soc Sci. 2018;8(11):12-24.
Adegbite TA, Shittu SA. The impact of value added tax on private investment in Nigeria. Account Financ Manag J. 2017;2(4):644-651.
Agu GA, Onwuka OO, Aruomah O. Impact of taxation on the performance of small and medium enterprises in Aba, Abia State, Nigeria. Arch Bus Res. 2019;7(SP):1-15.
Arene CJ, Ndomadu SO. Impact of value-added tax on the capital structure and profitability of Premier Breweries Plc, Nigeria. Account Finance Res. 2019;5(4):163-173.
Ayedun CA, Durodola DO, Oloyede SA, Abiodun SO. The value added tax (VAT) administration in Nigeria and the practice of estate surveying and valuation. Covenant J Bus Soc Sci. 2018;9(1):45-54.
Eze GP, Atagboro E. Effect of value-added tax (VAT) on price firmness in Nigeria: a time series analysis. Int J Soc Sci Humanit Res. 2020;8(1):502-514.
Ezejiofor RA, Adigwe PK, Echekoba F, Nwaolisa F. Tax as a fiscal policy and manufacturing company’s performance as an engine for economic growth in Nigeria. Eur J Bus Econ Account. 2015;3(3):1-12.
Inim VE, Udoh FS, Ede US. Taxation and the growth of small and medium enterprises in Nigeria. Asian J Soc Sci Manag Stud. 2020;7(3):229-235.
Jayachandran S. Why a tax the U.S. hasn’t embraced has found favor in much of the world. The New York Times, 2019.
Jideofor OI. Value added tax (VAT) and price stability in Nigeria. Eur J Bus Manag. 2021;5(23):12-19.
Koloane CT, Makanaisa MP. The impact of increasing VAT rate on state revenue: a South African case. J Econ Libr. 2020;7(3):20-31.
Kuria J. Effect of VAT incentives on the performance of EPZ firms in Kenya. Am J Finance. 2018;1(1):31-45.
Mu R, Fentaw NM, Zhang L. The impacts of value-added tax audit on tax revenue performance: the mediating role of electronic tax system, evidence from the Amhara Region, Ethiopia. Sustainability. 2022;14(8):61-75.
Muguchu J, Nelson HW, Wambugu A. Analysis of value added tax productivity in Kenya. J Econ Public Finance. 2020;6(4):20-29.
Mwangi G, Gitau R, Kung’u J. Influence of VAT incentives on corporate performance of manufacturing companies in Kenya. Manag Econ Res J. 2021;7(3):1-6.
Obiakor RT, Kwarbai J, Okwu AT. Value added tax and consumption expenditure behaviour of households in Nigeria: an empirical investigation. Int Rev Soc Sci. 2015;3(6):12-23.
Okoro PO. Effect of value added tax on the performance of manufacturing firms in Nigeria. Account Financ Manag J. 2021;2(4):644-651.
Oraka AO, Okegbe TO, Ezejiofor R. Effect of value added tax on the Nigerian economy. Eur Acad Res. 2017;5(2):12-19.
PwC. Value added tax (VAT) rate, 2019. Available from: http://taxsummaries.pwc.com/ID/Value-added-tax-(VAT)-rates
Singh SN. Impact of value added tax on business enterprises: a case of Mettu Town, Ethiopia. Financ Mark Inst Risks. 2019;3(4):62-73.
Wadesango N, Chirebvu G. Impact of value added tax (VAT) on small and medium enterprises in a developing country. Acad Account Financ Stud J. 2020;24(2):12-21.
