Tax Planning Strategies and Liquidity of Manufacturing Companies Quotedin Nigeria

ABSTRACT:Liquidity appears to be the life blood of every commercial enterprise but are often difficult toactualize due to high costs and high Effective Tax Rates (ETR). In order to manage the effects of taxes on theliquidity of firms, strategies are employed to plan the taxes. This research work focused on effect of TaxPlanning Strategies on liquidity of manufacturing firms in Nigeria. Ex-post facto research design was adoptedfor the study. The main objective of the study was to examine the effect of Tax Planning Strategies on liquidityof Manufacturing Companies Quoted in Nigeria. The population of the Study comprised of 52 manufacturingcompanies quoted on the Nigeria Stock Exchange as at 17th December, 2018 with 46 as the sample sizecalculated using Taro Yamani‟s formula. Data were collected from the audited annual reports of the sampledcompanies for a period of 10 years (2008 – 2017). The validity and reliability were based on the statutory audit„of the financial statements. Descriptive and inferential statistics were used to analyze the data. The resultrevealed that there is no significant effect of TP on Current Ratio (CR) of Manufacturing Companies Quoted inNigeria. This is evidenced by the results of the test, Adj.R2= -0.050824 and F-Statistics = 9.192516 and P-valueof 0.000006. The Study concluded that tax planning strategies have both negative and positive effects onliquidity of Manufacturing Companies Quotedin Nigeria. The study recommended that Tax Managers andFinance Officers should reduce thin capitalization and Capital Intensity to balance the source of income ofmanufacturing firms, while Research and Development costs should be properly managed to increase theircontributions to liquidity. Professional Tax Practioners should also be consulted for maximum benefit from taxplanning.

Keywords: Capital Intensity, Effective Tax Rate, Liquidity, Tax Planning Strategies, Tax Practioners, Thincapitalization, and Research and development costs.