International Journal of Accounting and Taxation

Corporate Effective Tax Rates in the Financial Services Sector: Evidence from Nigeria
Yinka Mashood Salaudeen, PhD

Abstract
This study determines the Effective Tax Rates (ETRs) being experienced by firms within the financial services sector. It also examines the neutrality and the determinants of these rates. The study adopts a micro-backward looking approach. Data were extracted from the annual reports of sample firms which cut across the sub-sectors of monetary intermediation, insurance and auxiliary services from 2010 to 2013. GAAP ETR and CASH ETR were separately regressed against firm size, firm leverage, capital intensiveness, nature of business and profitability in a Pooled OLS Multiple Regression Model. Finding suggests that both variants of ETR were below the Statutory Tax Rate through-out the period of study. It further shows that the monetary intermediation sub-sector bears a lower ETR than the insurance subsector while auxiliary services sub-sector pays the highest effective tax and that there is tax dispersion within the sector. The regression results show that profitability, firm leverage and capital intensiveness as the determinants of the both GAAP ETR and CASH ETR. The robustness checks in a Random Effect Model, to a large extent, confirm the OLS results. Findings also provide evidence to support the political clout theory. The policy implication of the findings lays in the need for further tax incentives for the auxiliary services sub-sector.

Full Text: PDF     DOI: 10.15640/ijat.v5n1a6