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Competition and Corporate Tax Avoidance: Empirical Evidence from Nigerian Deposit Money Banks

Filed in Accounting Project Topics, Current Projects by on September 25, 2020
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Competition and Corporate Tax Avoidance: Empirical Evidence from Nigerian Deposit Money Banks.


This study examined the impact of competition on tax avoidance activities among Nigerian Deposit Money Banks. Tax Revenue is essential for the growth and development of any economy.

The objective of the study was to examine the effects of competition on tax avoidance and also determine the impact of managerial efficiency and non-performing loans on tax avoidance has on the Nigerian Deposit Money Banks.

To achieve the objective, this study used panel regression model to analyse the data obtained from the financial statement of 15 banks operating on the Nigerian Stock Exchange for a period of 10 years.

The data collected were estimated by fixed-effects, random-effects and pooled estimations. Model selection criterion was applied such as the Hausman specification test to choose between the random and fixed effects.

The Hausman test result of 1.30 revealed that the random effect is more consistent for this research than the fixed effects.

The result of the random effect revealed that competition has a positive and an insignificant impact on tax avoidance, implying that competition exists among the Nigerian Deposit Money Banks and this competitive tendency does not influence tax avoidance.

The study also showed that while effective tax rate and managerial efficiency are negatively related, effective tax rate and non-performing loans showed a positive and insignificant relationship.

Competition in the banking industry reduces the cost of financial intermediation and improves delivery of high quality services thereby enhancing social welfare through creative innovations in technology and investment.

Since competition is a motivation for banks and also promotes economic growth by access to financing. This study revealed that competition brings about increase in the level of tax remittance.

It therefore, recommended that the environment in the banking sector should be further enhanced through favourable banking policies to encourage competition among the banks.

By this, tax revenue will increase for the government and this increase in revenue would help the Federal Government undertake more economic infrastructural developments.


 1.1 Background of the Study

Revenue in general is the income that accrues to individuals, companies and the government of a nation. In business however, it is the income that a company receives from its normal business activities, usually from the sales of goods and services to customers.

A company may receive revenue from interest, royalties or other fees. Government revenues are monies from taxes, fines, penalties, fees, water bills and rent proceeds from government assets, interest, dividends and capital gains received from the disposal of government investments.

Revenue accruing to a business can defray day-to- day running cost for business expansion, where the need arises those accruing to government on the other hand, are basically used for either capital or recurrent expenditure.

Tax revenue is believed to be the lifeblood of any government (Christensen and Murphy, 2004).

Olaseyitan and Sankay (2012), have expressed the view that taxes constitute the principal source of government revenue, and the effectiveness of any government largely depends on the ability of its citizens to voluntarily discharge their tax obligations without any coercion or harassment.


Adebayo, O., David, A. O., & Samuel, O. O. (2011). Liquidity management and commercial banks‟ profitability in Nigeria. Research Journal of Finance and Accounting, 2, (7-8).

Adediran, S. A., Josiah, M., & Ozoh, E. (2012). Accounting and social implications of twin problems on the national economy. Journal of Business and Management, 5(5), 31-36.

Aguolu, O. (2000). Taxation and tax management in Nigeria. Enugu: Meridian Associates.

Albertazzi, U., & Gembucorta, L. (2006). Bank profitability and business cycle. Journal of Financial Stability, 5(4), 393-409.

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