CONCEPT ANALYSIS OF RELATIONSHIP BETWEEN TAX PLANNING STRATEGIES AND PROFITABILITY

Abstract

Nigerian tax system has recently witnessed dramatic improvement, especially from 2015 to 2022.
This gives the government the opportunity to be executing various developmental project.
Companies, on the other hand, are negatively affected as heavy taxes imposed reduced their
profitability as a result, various tax planning strategies are being employed to put the companies
in advantageous position. This study, therefore, conceptually examined the impact of tax planning
strategies on profitability using an extensive review of the relevant literatures. The study is guided by
by Hoffman's Tax Planning Theory this is due to the theory's premise that it is legal for an entity
to consider tax planning strategies that can lower its tax liability. some study’s literature found a
negative association between company tax planning and profitability, while others have found that
it increases corporate profitability. The study concluded that Nigerian companies engages in
illegal tax planning, which may be caused by a lack of tax experts in these companies. The majority
of research on tax planning and profitability was done in industrialized countries, which may be
why there are fewer reported instances of company errors brought on by inadequate or poor tax
planning there. According to the survey, businesses should investigate additional tax planning
strategies like tax expertise and non-debt tax shields.