This study investigated the effect of company tax on telecommunication industry performance in Nigeria. The study adopted ordinary least square to examine the effect of company income tax, leverage and firm size on profit after tax. Data were obtained from annual financial statement of MTN from 2014 to 2018. The result of the descriptive statistics, correlation matrix, regression analysis and granger causality test were presented, analysed and discussed in chapter four.

The study revealed that; company income tax has negative and significant effect on profit after tax; leverage has significant effect on profit after tax; firm size has positive and significant effect on profit after tax

The study concluded that taxation has undesirable effect on the performance of telecommunication industry in Nigeria. The study further recommended that; telecommunication industry should device means aimed at exploring tax opportunity in Nigeria; Investments friendly taxation policy should be adopted by government; telecommunication industry should monitor the level of their debt; Assets of telecommunication industry should be further put into effective use.




1.1       Background to the Study

There has been a tremendous increase in government fiscal responsibilities in the recent years due to a continuous rise in population. Government responsibilities to her citizens has gone beyond ordinary provision of shelter and food to generation of employment opportunities, provision of infrastructural facilities, alleviations of poverty, provision of schools and others. As a result of these, government has continued to increase its revenue capacity so as to cater for her teeming populations.

Taxation serves as the major source of revenue to government at all tiers. Taxation can be define as a compulsory macroeconomic instrument that is imposed on the citizens of nation. Wambai and Hanga (2013) define taxation as an instrument the government uses to measure, access and control the informal sector that dominate developing economies of the world. Akintoye and Tashie (2013) asserted taxes is one major source of government revenue over the world but not every national government have been able to effectively exploit this great opportunity of revenue generation  which attributed to a number reasons including the system of taxation, tax legislation, tax administration and policy issues,  over reliance on other sources of revenue (such as foreign aid and grants), corrupt practices in the system – especially as it relates to the system of tax collection and behaviour of citizens towards tax payment, and ease of tax payment.                  

The major form of taxation in Nigeria is company income tax. Company income tax came into effect for the first time on 10th April 1954; although, a German Industrialist Wilhelm Van Siemens proposed the concept in 1918 the value added tax system has been adopted by different nations across the world. Company income tax has become a major source of revenue in many developing countries. In some African countries company income tax has been introduced in Nigeria, Benin Republic, Cote d’Ivore, Guinea, Kenya, Nigeria, Ghana, Madagascar, Mauritius, Niger Republic, Senegal, and Togo. Evidence suggested that in these countries, company income tax has become an important contributor to total government tax revenues (Adereti et al., 2011).

Telecommunication sector plays germane role in overall development of an economy by linking other sectors together. Adebayo and Akejiuba (2016) opined that telecommunication strategically and generically promote globalization, trade and commerce by providing infrastructure for enhancing communications across countries. Shakeel, Khan and Malik (2012) stated that the growth of telecommunication sector plays important role in reducing operating cost of business, cutting of inefficiency in the transmission of business information and expanding of market for goods and services through the linkage of different sector in the economy. Thus, leading nations like China, India, Germany, and United State of America, United Kingdom, Japan, Korea and Switzerland among others have been placing priorities in developing and expanding their telecommunication sector.                      

Musgrave and Musgrave (2004) comment that the dwindling level of tax revenue generation in the developing countries makes it difficult to use tax as an instrument of fiscal policy for the achievement of economic development. Some governments like Canada, United States, Netherland, and The United Kingdom have substantially influenced their economic development through tax revenue generated from Company Income Tax, Value Added Tax, and Personal Income Tax, and have prospered through tax revenue (Oluba, 2008). Nigeria has recorded an increase in tax revenue above the target every year. According to Ofoegbu, Akwu and Oliver, (2016) the Federal Inland Revenue Service (FIRS) reported taxation increased from N2.83 trillion to N4.71 trillion between 2010 and 2014.

Recently, in other to reduce revenue leakages and enhance tax productivity, the Nigerian government adopted the single treasury account. Despite this policy implementation and other efforts of the Nigerian government, government tax revenue has continued to reduce which has greatly affected the government in discharging her responsibility to the citizens. Iweala (2012) asserted that without diversification of Nigerian revenue from oil, the economy will soon collapse which calls for this study. Thus, this study examined the effect of company income tax on performance of telecommunication industry in Nigeria.

1.2       Statement of Problem

Tax revenue is arguably the major sources of government revenue in the modern day. The role of tax revenue in enhancing sustainable growth and development cannot be overemphasized. Nigeria like many other developing countries in the world has put in place countless economic policies in her numerous attempts to better the living standard of her populace in order to enhance sustainable economic growth and development (Hakeem, Chisom & Ikenna, 2016).

However, the Nigerian economy has continued to leave below expectation due to the inability of the government to finance its development policies and programs. It is crystal clear that the country is not just blessed with abundant deposit or supply of diverse natural resources (such as bitumen, crude oil, timbers among many others) but also highly favoured in term of human population size (Hakeem, et al., 2016). Despite this, the nation is plunge in the problem of unemployment, poverty, low per capital income, divestment, dilapidated infrastructural facilities among others.   

The Nigerian budget which is operated based on proposed expenditure against projected revenue has continue to increase in the recent years and government has resulted to borrowings to finance its budgets which is as a result of shortage in expected revenue. The implication of this on the Nigerian economy is the high services payment which drains the economy from growth and development resources.

The tax administration system in Nigeria over the years has been burdened by challenges ranging from non-identification, registration, poor documentation, corruption, multiple taxation, non-compliance of taxpayers, tax leakages inform of tax avoidance and evasion (Anaesoronye, 2013). Companies that pay tax in Nigeria have been bemoaning the high tax charged by the government with some companies closing down due to multiple tax system of the country. Thus, given the fact the telecommunication industrial is germinate to the economy, there is need to examine the effect of company tax on the sector’s performance in Nigeria.                    



1.3       Research Objectives

The following are the research objectives this seeks to achieve and they are to:

        i.            Examine the effect of company income tax on the performance of telecommunication industry in Nigeria.

     ii.            Determine the effect of leverage on the performance of telecommunication industry in Nigeria

   iii.            Establish the effect of firm size on the performance of telecommunication industry in Nigeria.      

   iv.            Evaluate the relationship direction of causality between company income tax and the performance of telecommunication industry in Nigeria.

1.4       Research Questions

In line with the research objectives above, the following are the research questions this research will give answers to:

        i.            What is the effect of company income tax on the performance of telecommunication industry in Nigeria?

     ii.            What is the effect of leverage on the performance of telecommunication industry in Nigeria?

   iii.               What is rte effect of firm size on the performance of telecommunication industry in Nigeria? 

   iv.            What is the direction causality between company income tax and the performance of telecommunication industry in Nigeria?


1.5       Research Hypotheses

In accordance with the research objectives and research questions above, the following are the research hypotheses of this study:

Ho1:       Company income tax has no significant effect on the performance of telecommunication industry in Nigeria.

Ho2:       Leverage has no significant effect on the performance of telecommunication industry in Nigeria.

Ho3:       Firm size has no significant effect on the performance of telecommunication industry in Nigeria.

Ho4:       There is no significant causality between company income tax and the performance of telecommunication industry in Nigeria.

1.6       Significance of the Study

Running a state effectively and efficiently is no doubt the core responsibility of the government of a nation and at all levels which includes the provision of social amenities, provision of security and granting of peace to its state. However, these responsibilities cannot be discharged appropriately without the use of finance and the government cannot definitely provide finance for itself and thus the need for taxation.

Taxation is a compulsory charge levied on all citizenry to ensure the smooth running of the state. Hence, this study is of immense need as it will elucidate on the meaning of taxation and the need for tax. Also, this study will enable the government know how the telecommunication sector can contribute to the taxation system of her state.

Furthermore, this study will expose the telecommunication system and the government to know the performance of the telecommunication sector over the years and its contribution to the development of Nigeria. Lastly, this study will contribute to previous study on the subject matter and also serve as a source of reference for future research in relation to the subject matter.

1.7       Scope of the Study

The study examines the relationship between company income tax and the performance of telecommunication sector in Nigeria. This study sought to get relevant information on the subject matter through the collection of data from the annual financial statement of MTN.

1.8       Operational Definition of Terms

Taxation: Taxation is a compulsory levy imposed on every citizen of a state by the government which are been used for the development of the state.

Company Income Tax: Company income tax is a type of tax that is charged directly to business organizations and is also been used by the government of a state to develop such state. The owner of an organization bore the risk of this kind of tax.

Value Added Tax: This kind of tax is charged directly to goods and services. This tax is borne by the final consumer.

Telecommunication Sector: This sector deals with the sending and receiving of vital information. This sector is so important in a country because we are now in a computer age. Hence, the sending and receiving of information should be done at the convenience of both the sender and the receiver.

Performance: Performance simply indicates the overall well being of something being used as a case study or something being put into consideration.