Tax Planning and Corporate Governance in Nigerian Banks

Abstract

This paper investigated tax planning with a view to determine its impact on corporate governance in Nigerian banks. To achieve this purpose, hypotheses were raised and a review of extant literature was made. The population of the study consisted of the twenty-one (21) recapitalized banks in Nigeria. Data for the study were generated from the companies’ annual reports and statements of account for a five-year period; 2007 – 2011. The stated hypotheses were statistically tested with regression analysis and Pearson Product Moment Co-efficient of Correlation. Our findings revealed that tax planning has a positive significant impact on corporate governance in Nigerian banks, but the accruable tax savings do not significantly outweigh tax planning costs. Since tax planning gives excessive powers to management over the resources of the bank, and also violates the rules of good corporate governance, though it increases the market value of banks, it was therefore recommended that audit committee of Nigerian banks should be saddled with the responsibilities of reviewing tax assessment and returns in order to minimize any form of strategic tax behaviour by management; tax authorities should periodically conduct tax audit of the various banks to examine whether there was any form of mischaracterization of financial statements; and any bank that violates the provision of tax laws in the act of tax planning should be properly investigated and prosecuted.

Keywords;          Tax planning, corporate governance, transparency, accountability, mischaracterization, Nigerian banks