Corporate Tax and Corporate Social Responsibility of Firms in Nigeria

Asian A Umobong, Uche T Agburuga


This study examined whether corporate tax (CT) is a substitute of and mutually exclusive to corporate social responsibility (CSR), or a complement thereof, using secondary data obtained from firms listed on the Nigeria Stock Exchange. It also sought to determine the nature of CSR practiced in Nigeria. Result confirmed that CT is positively and complementarily related to CSR of firms that practice environmental remediation, and is negatively related to, mutually exclusive and a substitute to CSR of firms that embark on poverty alleviation and enhancement of educational development. This later inverse relationship imply that such firms have the potential to indulge in aggressive tax planning behaviors. Also, firms that practice poverty alleviation as a form of CSR activity are more dominant in Nigeria with the mean of such firms higher than that of firms practicing environmental remediation. Interestingly, the size of firms are positively and significantly related to CSR for firms practicing environmental remediation implying the larger the size the more investment in CSR activities. Also, size is negatively and not significantly related to CSR for firms practicing poverty alleviation CSR activities implying that size does not influence such firms’ decision on whether to invest on CSR and avoid tax or whether to pay tax and mitigate investment in CSR. Based on these findings we recommend government should encourage firms practicing CSR as a complement to CT through awards and recognition, discourage aggressive tax planning behavior of mutually exclusive firms by setting up controls and monitoring mechanisms to ensure fair reporting in addition to provision of tax incentives for CSR investments to discourage tax avoidance.

Keywords: Taxation, Complements, Substitutes, poverty alleviation, environmental remediation, environmental accounting

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