The Effect Of Corporate Tax On The Profitability Of Business Organization

Corporate tax is the most productive revenue source of income to the government than taxes from other sources.

Although people generally do not like paying income tax, in remains a duty no citizen can legally run away from. It is therefore the practice for tax authorities to endeavor to make people pay income tax without tears since it is not possible to pay with cheers.

Taxes can be one of the largest cash out flow that a company experience. The introduction of corporate tax on any business has gone a long way affecting the performance of the businesses. Many business frown at it because it is responsible for cutting into their overall yield. With the exception of industries which enjoy tax holdings to enable them complete effectively, other firms are required by the laws of the federal republic of Nigeria to pay their corporate taxes, when due. It is known that under the condition of economic stress and hardship, coupled with a functions effect of inflation, unemployment, price instability decreasing standard of living, it is only firm that can turn those threats and challenges into opportunities that can survive. This country has been a victim of these economic problems for some years now. It is established that this condition effect every one’s life, including the persons attitude and moral values every one seeks for a method whereby he could succeed at least in keeping soul and body together. A situation whereby daily with the increase in the cost of living, has made people to resort to both avoidance and evasion of taxes.

The business sector is not left out. The prevalent economic conditions in the country have continually affected their values and standards. Both the input and output of production are affected. Amongst other several problems associated with these since the business organization is an economic unit of the economy, any problem encountered by it will likely to affect the economy as a whole. Thus, disruptions in the business do not affect it alone but entire economy.

Note 

The sources of data for this work will be both primary and secondary sources. The related literature review will contribute mainly the secondary data.

It should be realized that the goal of any business is to make profit. Therefore is should also be realized that profit is said tobe made when total sales revenue exceed total operating costs. Considering the above, there arises the need for firms to strive and adopt all measures and techniques necessary and available to produce profitability. A reasonable care should be taken to cut cost and improve the product quality so as to receive the acceptance of the customers (market). But with the high corporate tax imposed on business organizations one aboud to ask whether these measures advance the profitability of the firms.

Therefore, it is true to say that most of the problems facing these businessmen can be reduced if the high and cut-throat corporate taxation is reduced. In this research work, it will be revealed that corporate tax reduces the level of foreign investment and participation in Nigeria, in spite of investment opportunities that abound includes, the dis-incentive to investment and the discouragement of savings. Generally high rate of tax deeply affects the capital structure of the firm.

In other to free them from the burden of high rate, they might declare inaccurate financial figures as profits. This reduces the tax accruable to the government because of these practices.

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