Abstract: This study examined the effect of IFRS adoption on manufacturing companies’ tax payable from 2012 to 2018. Data gathered from the annual reports of fifty selected Nigerian listed companies were scrutinised employing PPMC and panel data methodology to quantify the effect of IFRS adoption on tax payable. It revealed that Profit before tax (PBT) caused a positive and significant effect on TAXATION, whereas Depreciation (DEPR), Shareholders’ Funds (SHDFUD), Long-term debt (LGTDEBT), and Noncurrent Asset (NONCURASET) impacted on TAXATION negatively. This showed that an surge in DEPR, SHDFUD, LGTDEBT and NONCURASET diminished TAXATION in manufacturing companies. Conclusively, IFRS adoption significantly downplayed manufacturing companies’ tax payable because organisations circumspectly and lawfully circumvent or reduce the tax payable through depreciation claimed on existing assets, the procurement of new noncurrent assets, and long term debt (leverage). It is advocated that there should be monitoring mechanism devices put in motion by the government to monitor procurement by companies, impairment of assets and debts acquired transparently, in order to deter the unnecessary and artificial reduction in tax payable
<a href="https://dx.doi.org/10.15611/fins.2020.4.01">DOI: 10.15611/fins.2020.4.01</a>
<p>JEL Classification: H25, G120, E220, E22, K230</p>
<p>Keywords: depreciation, taxation, shareholders’ funds, long-term debt, noncurrent asset, IFRS.</p>
<h2>1. Introduction</h2>
<p>International Financial Reporting Standards (IFRS) is an accounting standard engaged globally for international
uniformity, comparability and consistency in financial transactions and reports. It replaced GAAP in Nigeria which was
unanimously adopted in 2012. Before the commencement of IFRS, prepared and reported financial statements were drawn up
in Nigeria through SAS which was produced by the Nigerian Accounting Standards Board (NASB) which issued Statements of
Accounting Standards (SAS) as a yardstick in preparing the financial statement in the past by companies so as to
promote and enforce standards compliance. However, SAS is now considered outdated by the International Accounting
Standards Board (IASB) (cf. Fasina & Adegbite, 2014). This is an independent private sector body that
develops and approves International Financial Reporting Standards (IFRSs) with the motives of conformity and
uniformity. IASB Nigeria joined their counterparts in the world to abandon the old and outdated accounting
standard, and embraced fully IFRS in 2012. Since the adoption of IFRS in 2011, every company which is owned by private
individual and organization has discarded the outdated accounting standard, and switched to IFRS (Ezejiofor, 2018).
The IFRS’ adoption has been confirmed to initiate the stance of the reporting entities in Nigeria to comply with the
adopted newly standards in their counterparts worldwide, which would improve their reporting and gain worldwide
recognition (Josiah, Okoye, & Adediran 2013). IFRS are being employed globally for the preparation of financial
statements and reporting for privately owned organisations. It has opened global attention for the effective and
efficient improvement on financial statement reporting in terms of fairness, comparability, uniformity, and the
consistent presentation of financial statements. IFRS adoption necessitates the important costs’ reduction, increases
capital allowance and has significance for organizations in terms of fraud prevention, proper accountability,
consistent transaction treatment, and financial statement reporting for both internal and external users.</p>
<p>IFRS are established through an international process that encompasses financial analysts, accountants and other
financial statements users such as stock exchanges, the business community, legal and regulatory authorities,
academics and interested organizations and individuals from around the world. IASB conducted due process which has the
complete obligation for technical issues comprising the standards issuance and publication with its explicit
interpretations. This IFRS adoption as implemented by IASB, determines the qualities of standards in financial
reporting. It also enhances the quality of reporting financial information especially, with regard to the perception of
tax. All organisations are mandated to report current tax to the tax authority at the end of every financial reporting
year. It is also mandated in IAS12 that organisations must classify the over or under-provision of current tax
concerning prior year(s). Over-provision refers as tax income, while under-provision is called tax expense. A
company’s financial reporting is effected through the preparation, readiness and publication of financial statements.
These financial statements are mandatory to show certain quality in tandem with tax remitted to FIRS, but does the
fulfilment of IAS 12 on the remittance of current tax to the tax offices responsible for tax collection, have an
effect on tax remittance by Nigerian manufacturing companies? Many studies have been carried out on IFRS adoption in
Nigeria but there are no extant research on the effect of IFRS adoption on tax payable by manufacturing companies in
Nigeria. This study therefore examines the effect of IFRS adoption on tax remitted to the Federal Inland Revenue
Services of Nigeria (FIRS), responsible for tax collection, by manufacturing companies in Nigeria. To achieve this
objective, this study was structured into five parts: the background of the study, literature review, methodology, and
a discussion of the findings. The last part is the conclusion and recommendations. This study is expected to
contribute to the subject knowledge through the methodology and research literature in gauging the effect of IFRS
adoption on tax payable by manufacturing companies in Nigeria.</p>
<h2>2. Literature review and hypotheses</h2>
<h3>2.1. Influence of IFRS on taxation</h3>
<p>Tax income (tax expenses) is the cumulative amount engaged in deciding Profit and Loss for the period in regard of
current and deferred taxes. The main concern treated by IAS 12 is the management of current and deferred taxes. It is
also mandatory to specify whether there is an over-provision or under-provision of tax in respect to prior year(s).
Tax over-provision is recognised as a tax income, while under-provision is recognised as an extra tax expense, both
must be included in Profit and Loss for the period they are recognized. Deferred tax comprises associating the
carrying amount (CA) of liabilities and assets with the tax bases (TB). The tax base is the volume ascribed to
liabilities and assets for tax purposes. IFRS implementation also brings the prospect to decrease tax payable. The
IFRS financial report serves as a basis for manipulative tax income. Eberhartinger and Klostermann (2007) stated that
the custom of IFRS on tax calculation simplifies the reporting process and invariably reduces the cost of compliance.
However, recognition of the tax basis through IFRS increases tax payable (Haverals, 2007). Therefore, by referring to
the above, the following hypothesis is proposed.</p>
<p>H1: IFRS has a significant impact on taxation of Nigerian manufacturing companies.</p>
<h3>2.2. Depreciation</h3>
<p>This is called the wear and tear of an asset, and is measured and calculated through two accepted methods. The
straight line and reducing balance methods are engaged officially to calculate the depreciation of Plant property and
equipment (PPE) according to IAS 16, whilst according to IAS 16 & IAS 38, the depreciation procedure for
depreciable assets leased must be consistent with depreciable assets owned. This is based on the shorter of the useful
life and lease terms. It is stated that the asset residual value and life span must be revised to discover the
efficacy of such PPE at the financial year-end. This depreciation is recognized as expenses and displayed on the debit
side of the Profit and Loss account of the company. All companies, irrespective of their size, leverage this
depreciation legally to circumvent the payment of tax to FIRS which is responsible for collecting taxes. Tax payable,
according to Adegbite (2020) is a function depreciation value of PPE, which led to the following hypothesis.</p>
<p>H2: Depreciation has an important effect on tax payable by Nigerian manufacturing companies</p>
<h3>2.3. Long-term debt</h3>
<p>This is referred to as debt acquired outside the organization to complement the equity in order to finance it to
achieve its predetermined and projected objectives. This is encapsulated in IAS39 which is a financial instrument. An
organization recognized a financial asset and financial liability in the statement of financial position (previously
the Balance Sheet) when the organization becomes a party to instrument contractual provisions. The interest and other
costs expended in connection with financial asset and liabilities are deductible from Profit and Loss accounting,
which invariably lessen taxation. If this debt is higher than the existing volume of equity, it is likely the
organization has accrued higher profits aggressively. The interest paid at the end of the accounting period is
recognized as expenses which ultimately downplay assessable profit, and thereby reduce tax payable to the government.
Thus, taxation is a function of long-term debt. With this, the following hypothesis was generated:</p>
<p>H3: Long-term debt plays a significant role on tax payable by Nigerian manufacturing companies</p>
<h3>2.4. Noncurrent Asset</h3>
<p>According to IAS 16, this refers to assets which can be used for more than an accounting year of the organisation.
This means that the economic benefits of such assets must flow into the organisation for longer than a period of an
accounting year. The procurement of noncurrent assets for the repayment of inefficient assets attracts capital
allowance through investment allowance, initial allowance and annual allowance, which are an allowable deduction in
adjusted profit for tax purposes. The Annual Investment Allowance is a category of capital allowance which is the
mechanism by which capital assets attract tax relief. For tax purposes, Annual Investment Allowance and other capital
allowances are deducted from the accounting profit in order to arrive at taxable profits. This would usually qualify
for the Annual Investment Allowance and as such the full cost would be allowable for tax purposes in the year of
purchase. This perhaps reduces the tax payable to the government purse for the effective delivery of essential
services for the population. Companies hide under this capital allowance to avoid payment of taxation to the
government. Thus, the study hypothesized that:</p>
<p>H4: Noncurrent assets play a significant role in tax payable by Nigerian manufacturing companies</p>
<h3>2.5. Profitability</h3>
<p>Taxation is a function of assessable profit meant to establish the corporate tax. It epitomises an organization’s
expenses which actually downplay expected profits. Management mostly feared the magnitude of inefficient market
performance, which the leads to diminished investment because of low returns. However, this absolutely affects
taxation, because the higher the assessable profit, the higher the taxation. Thus, the study hypothesized that:</p>
<p>H5: Profitability has a negative impact on tax payable by Nigerian manufacturing companies</p>
<p><span><img src="2020/01-Adegbite-web-resources/image/Adejare_rys-1_fmt.png" alt="Adejare_rys-1.tif" /></span>Fig. 1.
Conceptual Framework. Authors’ Design (2020)</p>
<p>Source: author`s work. </p>
<h3>2.6. Theoretical review</h3>
<p>Constraints Theory (CT)</p>
<p>The Constraints Theory (CT), according to Goldratt (1990), is an approach for recognising the most imperative
limiting factor that stands as an obstacle in achieving a desire and goal, in order to circumspectly and absolutely
circumvent such constraint, eradicate, or reduce to the barest level. CT is called a bottleneck in the manufacturing
sector. This theory focuses on organisation enhancement via improved profitability and effective resources
utilisation. Taxation has been regarded as an organisation bottleneck because of the profit motives and the
maximization of shareholders’ funds as a successful organisation’s objectives. The objectives of every organisation
are complemented with cost minimisation and profit maximization. To achieve these, management reduces taxation legally
to siphon off the money or income that ought to have been remitted to the tax authority into the organisation’s purse
in terms of retained earnings or increased shareholders’ wealth. </p>
<p>Implementing this theory, results in substantial organisation’s improvement without reducing its resources, and the
effective and efficient management of both human and material organisation resources. CT is applied to a restricted
area and can only be executed with the minimal participation of the staff. </p>
<p>Compliance Theory (COT)</p>
<p>Compliance theory is a methodology to managerial structure that is key in several concepts from the
participatory management and classical models. According to COT, organizations can be categorized by the variety
of power engaged to manage; COT is a widespread approach which supports employees and their institutions in organizing
activities and operations ethically based on acceptable norms, principle, standards; with the integrity of the highest
order, and in compliance and alignment with acceptable legal and regulatory prerequisites. The theory advocated
that the crucial determinants variables’ compliance are the organization’s and individual’s personal levels
of integrity, objectivity, morality, competency and moral development. IFRS is the accounting standard which has been
mandated since 2011, the year of adoption for the uniformity and consistency in financial statement preparation. COT
further advocated the absolute IFRS compliance which must be based on the integrity, competency, and objectivity of
the manager who is given accounting and financial statement responsibilities. </p>
<p>Therefore, to achieve the study’s objective and stated disposition, the author employed the Constraints Theory
(CT) and Compliance Theory (COT).</p>
<h3>2.7. Empirical review of the related studies</h3>
<p>Braga (2018) investigated the relationship between mandatory IFRS adoption and company tax avoidance. The data were
gathered from 35 countries for publicly-trading companies in North America from 1999 to 2014. It was found that IFRS
adoption has a meaningful association with corporate tax avoidance. The results showed that following the subsequent
IFRS adoption, large firms with higher book-tax conventionality environments were involved in tax avoidance more
extensively than firms with lower book-tax conventionality environments. This outcome was based only on North America.
</p>
<p>Nakao and Gray (2018) determined the IFRS benefits and impact on Brazilian organisations with particular reference to
book-tax conformity and taxation regulation legacy. Their results predicted that limited stock market monitoring
levels by companies demonstrated book-tax conformity with information quality enhancement. In the same vein, the
results also showed that the companies’ limited stock market monitoring levels are aligned with the expected quality
information enhancement, connected with IFRS adoption in Brazil. However, this research outcome is confined to Brazil.
</p>
<p>Abedana, Omane-Antwi and Owiredu (2016) investigated the variations of <br />IFRS to deferred tax, corporate taxes,
and net tax liabilities (assets) in the Ghana Stock Exchange from 2007 to 2008 which reflected the switch to IFRS from
GNAS, with particular reference to IAS 12. The quantitative and cross-sectional approach was predominately adopted as
the research model to achieve the study’s objective. It was found that IFRS/IAS adoption led to relieving tax burden
which invariably reduces tax payable by the listed companies. Nevertheless, the study was for Ghana not Nigeria,
therefore its study’s outcome cannot be applied to Nigeria.</p>
<p>David (2016) assessed the influence of IFRS adoption on Czech management accounting of unlisted companies. The
results, with regard to the implemented questionnaire survey, showed that IFRS adopters progressively integrate IFRS
ideologies into management accounting prediction, which invariably increased the Czech companies’ performance.
However, this study is based on IFRS within the scope of Czech unlisted companies, does not apply to Nigeria.</p>
<p>Yapa, Kraal & Joshi (2015) inspected IFRS adoption and local standards’ impact on socio-economic condition of the
selected countries. Qualitative research was the adopted methodology embedded with the institutional and stakeholder
theory in the study. Findings revealed that IFRS reduced the companies’ tax payable which invariably displayed a
negative effect on socio-economic condition of the selected countries, and not a single country, therefore the outcome
generated is irrelevant to Nigeria.</p>
<p>Muller (2014) evaluated the impact of IFRS adoption on relative and absolute quality (proxied by value relevance) in
European listed companies. The financial information was obtained through European stock markets. The results revealed
that IFRS adoption increased the quality of the consolidated statements because of their transparency and disclosure.
This study was limited to the relative and absolute quality (proxied by value relevance) in European listed companies
in which taxation is totally not inclusive.</p>
<p>Fasina and Adegbite (2014) analysed empirically the effect of IFRS adoption on Nigerian accounting practices. The
outcome of the questionnaire and personal interviews employed with Chi-square and ANOVA strongly indicated a positive
relationship between IFRS adoption and organisations’ financial performance. The study further advocated that the IFRS
adoption effect improved the efficiency and productivity of organisations in terms of uniformity and quality of
financial statements. However, its effect on Nigerian accounting practices was investigated but not on taxation,
therefore the findings were confined to accounting practices and not to taxation policy.</p>
<p> The research gap was discovered due to the insufficient study which was also limited in scope (and not extended to
2018). The extant studies were initiated in Europe and in African countries such as Ghana but were limited to
corporate tax. This study is unique because it highlights the effect on IFRS adoption on taxation (aggregation of VAT,
education tax and corporate tax) which has had scant research in Nigeria.</p>
<h2>3. Methodology</h2>
<p>This study examined the IFRS adoption effect on companies’ tax payable from 2012 to 2018. Data were gathered from
yearly reports of selected 50 Nigerian listed companies, and scrutinised employing Pearson product moment correlation
(PPMC) and panel data methodology to quantify the effect on tax payable. Depreciation, long-term debt, total liability
and noncurrent assets are the independent variables, while taxation payable is the dependent variable and control
variables are represented by shareholders’ funds and profitability.</p>
<h3>3.1. Model specification</h3>
<p>Taxation which is the explained variable, is the aggregation of company income tax, education tax and VAT, while the
explanatory variables are depreciation, long-term debt, total liability and noncurrent assets, and the control
variables are represented by shareholders’ funds and profitability.</p>
<p>	TAXATION = f(PBT,DEPR,SHDFUD,LGTDEBT,TOTLIAB,NONCURASET µ),	(1)</p>
<p><span><img src="2020/01-Adegbite-web-resources/image/4028.png" alt="4028.png" /></span>TAXATION = α0 + <span><img
src="2020/01-Adegbite-web-resources/image/4034.png" alt="4034.png" /></span>α1PBT + <span><img
src="2020/01-Adegbite-web-resources/image/4039.png" alt="4039.png" /></span>α2DEPR +<span><img
src="2020/01-Adegbite-web-resources/image/4045.png" alt="4045.png" /></span>α3SHDFUD +<span><img
src="2020/01-Adegbite-web-resources/image/4051.png" alt="4051.png" /></span>α4LGTDEBT</p>
<p>	+ <span><img src="2020/01-Adegbite-web-resources/image/4075.png" alt="4075.png" /></span>α5TOTLIAB +<span><img
src="2020/01-Adegbite-web-resources/image/4081.png" alt="4081.png" /></span>α6NONCURASET + µ1,	(2)</p>
<p>where:	TAXATION	– aggregation of VAT, education tax and corporate tax,</p>
<p>	PBT		– profit before tax,</p>
<p>	DEPR		– depreciation,</p>
<p>	SHDFUD		– shareholders’ funds,</p>
<p>	LGTDEBT		– long term debt,</p>
<p>	TOTLIAB		– total liabilities,</p>
<p>	NONCURASET	– noncurrent assets. </p>
<h2>4.	Results and discussion</h2>
<p>This section presents the results obtained from the analysis of data collected from annual reports of fifty selected
Nigeria listed companies. These data were scrutinised by employing PPMC and panel data methodology to quantify the
IFRS adoption effect on tax payable. </p>
<p>Table 1 showed that a unit increase in PBT raised taxation by 0.23%, revealing that PBT generated a positive effect
on taxation (β = .2343325, t = 0.000<0.05). A one unit increase in depreciation led to a decrease in taxation by
0.024%, indicating that there is a positive effect of DEPR on taxation (β = -.0240423, t = 0000 < 0.05). However, a
unit increase in SHDFUD led to a decrease in taxation by 0.11%, which further indicates that there was a negative
effect of SHDFUD on taxation (β = -.0112534, <br />t = 0000 > 0.05). The result also shows that a unit increase in
LGTDEBT decreased taxation by 0.032%, indicating that there is a negative effect of LGTDEBT on Taxation (β =
-.0321145, t = 0.003 < 0.05). Moreover, a one unit increased in TOTLIAB decreased Taxation by 0.041% which
indicates that there was a negative effect of TOTLIAB on taxation (β = -.0412378, t = 0.002 < 0.05). It was also
found that a unit increase in NONCURASET decreased taxation by 5.67%, which reveals a negative effect occurring
between NONCURASET and taxation (β -5.67345, t = 0.000 > 0.05).</p>
<p>Table 1. Pooled model on the IFRS adoption effect on taxation in Nigerian manufacturing companies</p>
<table id="table-1" class="table table-bordered">
<colgroup>
<col />
<col />
<col />
<col />
<col />
<col />
<col />
</colgroup>
<tbody>
<tr>
<td>
<p>Dependent variable</p>
</td>
<td>
<p>Independent variables </p>
</td>
<td>
<p>Coefficient </p>
</td>
<td>
<p>Standard </p>
</td>
<td>
<p>T </p>
</td>
<td>
<p>P>/T/</p>
</td>
<td>
<p>(95% conf. Interval)</p>
</td>
</tr>
<tr>
<td rowspan="7">
<p>TAXATION</p>
</td>
<td>
<p>PBT</p>
</td>
<td>
<p>.2343325 </p>
</td>
<td>
<p>0.030237</p>
</td>
<td>
<p>7.75</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>.2994952 .3003698</p>
</td>
</tr>
<tr>
<td>
<p>DEPR</p>
</td>
<td>
<p>-.0240423</p>
</td>
<td>
<p>0.004857</p>
</td>
<td>
<p>-4.95</p>
</td>
<td>
<p>0.001</p>
</td>
<td>
<p>-.0007791 .0006924</p>
</td>
</tr>
<tr>
<td>
<p>SHDFUD</p>
</td>
<td>
<p>-.0112534</p>
</td>
<td>
<p>0.001931</p>
</td>
<td>
<p>-5.83</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-.0003215 .0000536</p>
</td>
</tr>
<tr>
<td>
<p>LGTDEBT</p>
</td>
<td>
<p>-.0321145</p>
</td>
<td>
<p>0.009336</p>
</td>
<td>
<p>-3.44</p>
</td>
<td>
<p>0.003</p>
</td>
<td>
<p>-.0060524 .0012578</p>
</td>
</tr>
<tr>
<td>
<p>TOTLIAB</p>
</td>
<td>
<p>-.0412378</p>
</td>
<td>
<p>0.009889</p>
</td>
<td>
<p>-4.17</p>
</td>
<td>
<p>0.002</p>
</td>
<td>
<p>.0000644 .0004927</p>
</td>
</tr>
<tr>
<td>
<p>NONCURASET</p>
</td>
<td>
<p>-5.67345</p>
</td>
<td>
<p>0.811653</p>
</td>
<td>
<p>-6.99</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-.0000429 .0000298</p>
</td>
</tr>
<tr>
<td>
<p>CONSTANT</p>
</td>
<td>
<p>5.893458</p>
</td>
<td>
<p>0.406726</p>
</td>
<td>
<p>14.49</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-7400.187 122531.8</p>
</td>
</tr>
<tr>
<td>
<p>R squared =</p>
<p>0.6734</p>
</td>
<td>
<p>Adj</p>
<p>R squared = 0.5892</p>
</td>
<td>
<p>Prob> </p>
<p>F = 0.0000</p>
</td>
<td colspan="3">
<p>Root MSE = 2.5e+05</p>
</td>
<td>
<p>F(6, 62) = 789.21</p>
</td>
</tr>
</tbody>
</table>
<p>Source: researcher’s computation. </p>
<p>R2 and adjusted R2 (0.6734 and 0.5892 respectively) proved that the incorporated variables were sufficient and fitted
to pronounce the IFRS adoption effects on manufacturing companies’ tax payable. This was also confirmed by F
Probability 0.000 which is the benchmark for the significance of the model.</p>
<p>Table 2 shows that a unit increase in profit before tax increased taxation by 0.29%, and revealed that PBT generated
a positive effect on taxation (β = .2999325, t = 0.000 < 0.05). A one unit increase in depreciation led to a
decrease in taxation by 0.010%, indicating that there was a negative effect of DEPR on taxation <br />(β= -.0100434, t
= 0000 < 0.05). However, a unit increase in SHDFUD led to a decrease in taxation by 0.131%, which further indicates
that there was a negative effect of SHDFUD on taxation (β = -.0131339 t = 0000 > 0.05). The result also shows that
a unit increase in LGTDEBT decreased taxation by 0.023%, indicating that there was a negative effect of LGTDEBT on
Taxation (β = -.0236551, t = 0.000 < 0.05). Additionally, a one unit increase in TOTLIAB decreased Taxation by
0.302%, proving that there was a negative effect of TOTLIAB on Taxation (β= -.0302141, <br />t = 0.002 < 0.05). It
was also found that a unit increase in NONCURASET decreased taxation by 6.52%, which reveals a negative effect of
NONCURASET on taxation <br />(β = -6.524324, t = 0.000 > 0.05).</p>
<p>Table 2. Random model on the IFRS adoption effect on taxation in Nigerian manufacturing companies</p>
<table id="table-2" class="table table-bordered">
<colgroup>
<col />
<col />
<col />
<col />
<col />
<col />
<col />
</colgroup>
<tbody>
<tr>
<td>
<p>Dependent variable</p>
</td>
<td>
<p>Independent variables </p>
</td>
<td>
<p>Coefficient </p>
</td>
<td>
<p>Standard error </p>
</td>
<td>
<p>T</p>
</td>
<td>
<p>P>/T/ </p>
</td>
<td>
<p>(95% conf. Interval) </p>
</td>
</tr>
<tr>
<td rowspan="7">
<p>Taxation</p>
</td>
<td>
<p>PBT</p>
</td>
<td>
<p>.2999325</p>
</td>
<td>
<p>0.042185</p>
</td>
<td>
<p>7.11</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>.2995037 .3003612</p>
</td>
</tr>
<tr>
<td>
<p>DEPR</p>
</td>
<td>
<p>-.0100434</p>
</td>
<td>
<p>0.002438</p>
</td>
<td>
<p>-4.12</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-.0007647 .000678</p>
</td>
</tr>
<tr>
<td>
<p>SHDFUD</p>
</td>
<td>
<p>-.0131339</p>
</td>
<td>
<p>0.002419</p>
</td>
<td>
<p>-5.43</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-.0003178 .000050</p>
</td>
</tr>
<tr>
<td>
<p>LGTDEBT</p>
</td>
<td>
<p>-.0236551</p>
</td>
<td>
<p>0.007756</p>
</td>
<td>
<p>-3.05</p>
</td>
<td>
<p>0.006</p>
</td>
<td>
<p>-.0060056 -.0013046</p>
</td>
</tr>
<tr>
<td>
<p>TOTLIAB</p>
</td>
<td>
<p>-.0302141</p>
</td>
<td>
<p>0.008535</p>
</td>
<td>
<p>-3.54</p>
</td>
<td>
<p>0.002</p>
</td>
<td>
<p>-.000059 .0004872</p>
</td>
</tr>
<tr>
<td>
<p>NONCURASET</p>
</td>
<td>
<p>-6.524324</p>
</td>
<td>
<p>-1.025837</p>
</td>
<td>
<p>-6.36</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>.0000422 .0000291</p>
</td>
</tr>
<tr>
<td>
<p>CONSTANT</p>
</td>
<td>
<p>57565.8</p>
</td>
<td>
<p>5345.014</p>
</td>
<td>
<p>10.77</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-6132.454 121264</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>R-squared within = 0.6734 between = 0.5563</p>
<p>overall = 0.7532</p>
</td>
<td colspan="2">
<p>Prob > chi2 = 0.000</p>
</td>
<td colspan="3">
<p>Wald chi2 (6) = 2.58e+07</p>
</td>
</tr>
</tbody>
</table>
<p>Source: researcher’s computation. </p>
<p>Table 3 shows that a unit increase in Profit Before Tax increased taxation by 0.30%, and reveals that PBT generated a
positive effect on taxation (β = .3000541, <br />t = 0.000 < 0.05). A one unit increase in depreciation led to a
decrease in taxation <br />by 0.015%, indicating that there was a negative effect of DEPR on taxation <br />(β=
-.01500909, t = 0.004 > 0.05). However, a unit increase in SHDFUD led to <br />a decrease in taxation by 0.121%,
and it further indicates that there was a negative effect of SHDFUD on taxation (β = -.0120656, t = 0.010 > 0.05).
The result also</p>
<p>Table 3. Fixed model on the IFRS adoption effect on taxation in Nigerian manufacturing companies</p>
<table id="table-3" class="table table-bordered">
<colgroup>
<col />
<col />
<col />
<col />
<col />
<col />
<col />
</colgroup>
<tbody>
<tr>
<td>
<p>Dependent variable</p>
</td>
<td>
<p>Independent variables </p>
</td>
<td>
<p>Coefficient </p>
</td>
<td>
<p>Standard error</p>
</td>
<td>
<p>T</p>
</td>
<td>
<p>P>/T/</p>
</td>
<td>
<p>(95% conf. Interval) </p>
</td>
</tr>
<tr>
<td rowspan="7">
<p>TAXATION</p>
</td>
<td>
<p>PBT</p>
</td>
<td>
<p>.3000541</p>
</td>
<td>
<p>0.038078</p>
</td>
<td>
<p>7.88</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>.2997198 .3003885</p>
</td>
</tr>
<tr>
<td>
<p>DEPR</p>
</td>
<td>
<p>-.0150909</p>
</td>
<td>
<p>0.00238</p>
</td>
<td>
<p>-4.24</p>
</td>
<td>
<p>0.004</p>
</td>
<td>
<p>-.0006843 .0008661</p>
</td>
</tr>
<tr>
<td>
<p>SHDFUD</p>
</td>
<td>
<p>-.0120656</p>
</td>
<td>
<p>1.67E-05</p>
</td>
<td>
<p>-3.92</p>
</td>
<td>
<p>0.010</p>
</td>
<td>
<p>-.0002084 .0000772</p>
</td>
</tr>
<tr>
<td>
<p>LGTDEBT</p>
</td>
<td>
<p>-.0086099</p>
</td>
<td>
<p>0.001117</p>
</td>
<td>
<p>-7.71</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-.0108483 -.0063714</p>
</td>
</tr>
<tr>
<td>
<p>TOTLIAB</p>
</td>
<td>
<p>-.022094</p>
</td>
<td>
<p>1.93E-05</p>
</td>
<td>
<p>-4.86</p>
</td>
<td>
<p>0. 001</p>
</td>
<td>
<p>.0001252 .0003132</p>
</td>
</tr>
<tr>
<td>
<p>NONCURASET</p>
</td>
<td>
<p>-2.326756</p>
</td>
<td>
<p>0.450049</p>
</td>
<td>
<p>-5.17</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>-.0000252 .0000298</p>
</td>
</tr>
<tr>
<td>
<p>CONSTANT</p>
</td>
<td>
<p>78185.42</p>
</td>
<td>
<p>6200.271</p>
</td>
<td>
<p>12.61</p>
</td>
<td>
<p>0.000</p>
</td>
<td>
<p>18182.5 138188.3</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>R-squared within = 0.0654</p>
<p> between = 0.4325</p>
<p>overall = 0.7865</p>
</td>
<td colspan="2">
<p>Prob> chi2 = 0.000</p>
</td>
<td colspan="3">
<p>F(6, 53) = 2.74e+06</p>
</td>
</tr>
</tbody>
</table>
<p>Source: researcher’s computation. </p>
<p>shows that a unit increase in LGTDEBT decreased Taxation by 0.0080%, indicating that there was a negative effect of
LGTDEBT on taxation (β = -.0086099, t = 0.000 < 0.05). Furthermore, a one unit increase in TOTLIAB reduced taxation
by 0.022%, proving that there was a negative effect of TOTLIAB on taxation (β = .022094, <br />t = 0.001 < 0.05).
It was also found that a unit increase in NONCURASET decreased taxation by 2.32 which shows a negative effect of
NONCURASET on Taxation <br />(β = -2.326756, t = 0.000 > 0.05).</p>
<p>Table 4 shows the Hausman test decision for fixed and random effects. The Hausman test advocated the consideration of
the random effect model as the appropriate model for the analysis and interpretation. Therefore, the fixed effect was
rejected because chi2< 0 is 203.46, which is higher than 0.05.</p>
<p>Table 4. The Hausman test</p>
<table id="table-4" class="table table-bordered">
<colgroup>
<col />
<col />
<col />
<col />
<col />
<col />
<col />
</colgroup>
<tbody>
<tr>
<td>
<p>Dependent variable</p>
</td>
<td colspan="2">
<p>Independent variables </p>
</td>
<td>
<p>Coefficient </p>
<p>(b) </p>
</td>
<td>
<p>Coefficient (B)</p>
</td>
<td>
<p>(b-B) </p>
<p>Difference </p>
</td>
<td>
<p>Sqrt <br />(diag (v-b-v-B)) S.E </p>
</td>
</tr>
<tr>
<td rowspan="6">
<p>TAXATION</p>
</td>
<td colspan="2">
<p>PBT</p>
</td>
<td>
<p>.2999325</p>
</td>
<td>
<p>.3000541</p>
</td>
<td>
<p>-0.00012</p>
</td>
<td>
<p>.0001416</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>DEPR</p>
</td>
<td>
<p>-.0100434</p>
</td>
<td>
<p>-.0150909</p>
</td>
<td>
<p>-0.01013</p>
</td>
<td>
<p>.</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>SHDFUD</p>
</td>
<td>
<p>-.0131339</p>
</td>
<td>
<p>-.0120656</p>
</td>
<td>
<p>-0.00107</p>
</td>
<td>
<p>.0000611</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>LGTDEBT</p>
</td>
<td>
<p>-.0236551</p>
</td>
<td>
<p>-.0086099</p>
</td>
<td>
<p>-0.01505</p>
</td>
<td>
<p>.000439</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>TOTLIAB</p>
</td>
<td>
<p>-.0302141</p>
</td>
<td>
<p>-.022094</p>
</td>
<td>
<p>0.00812</p>
</td>
<td>
<p>.0000864</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>NONCURASET</p>
</td>
<td>
<p>-6.524324</p>
</td>
<td>
<p>-2.326756</p>
</td>
<td>
<p>-4.19757</p>
</td>
<td>
<p>.0000119</p>
</td>
</tr>
<tr>
<td colspan="2">
<p>b = consistent under Ho and Ha</p>
</td>
<td colspan="3">
<p>B = inconsistent under Ha, efficient under </p>
<p>Ho </p>
</td>
<td colspan="2">
<p>Test: Ho: difference in coefficients <br />not systematic <br />Chi2 (6) = (b-B)’ [ (v-b-v-B)^ (-1)]</p>
<p> (b-B) = 203.46</p>
<p>Chi2< 0.0000</p>
</td>
</tr>
</tbody>
</table>
<p>Source: researcher’s computation. </p>
<p>Table 5. Correlation matrix – the IFRS adoption effects on taxation in Nigerian manufacturing company</p>
<table id="table-5" class="table table-bordered">
<colgroup>
<col />
<col />
<col />
<col />
<col />
<col />
<col />
<col />
</colgroup>
<tbody>
<tr>
<td>
</td>
<td>
<p>Taxation</p>
</td>
<td>
<p>PBT</p>
</td>
<td>
<p>DEPR</p>
</td>
<td>
<p>SHDFUD</p>
</td>
<td>
<p>LGTDEBT</p>
</td>
<td>
<p>TOTLIAB</p>
</td>
<td>
<p>NONCURASET</p>
</td>
</tr>
<tr>
<td>
<p>Taxation</p>
</td>
<td>
<p>1.0000</p>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
</tr>
<tr>
<td>
<p>PBT</p>
</td>
<td>
<p>0.3600*</p>
</td>
<td>
<p>1.0000</p>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
</tr>
<tr>
<td>
<p>DEPR</p>
</td>
<td>
<p>-0.0310 </p>
</td>
<td>
<p>-0.0310</p>
</td>
<td>
<p>1.0000</p>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
</tr>
<tr>
<td>
<p>SHDFUD</p>
</td>
<td>
<p> 0.3496* </p>
</td>
<td>
<p>0.0496* </p>
</td>
<td>
<p>-0.0326</p>
</td>
<td>
<p>1.0000</p>
</td>
<td>
</td>
<td>
</td>
<td>
</td>
</tr>
<tr>
<td>
<p>LGTDEBT</p>
</td>
<td>
<p>-0.0482</p>
</td>
<td>
<p>-0.0476 </p>
</td>
<td>
<p>0.0600 </p>
</td>
<td>
<p>-0.0334</p>
</td>
<td>
<p>1.0000</p>
</td>
<td>
</td>
<td>
</td>
</tr>
<tr>
<td>
<p>TOTLIAB</p>
</td>
<td>
<p>-0.4477*</p>
</td>
<td>
<p>0.5476*</p>
</td>
<td>
<p>0.0344 </p>
</td>
<td>
<p>0.6871* </p>
</td>
<td>
<p>0.0219</p>
</td>
<td>
<p>1.0000</p>
</td>
<td>
</td>
</tr>
<tr>
<td>
<p>NONCURASET</p>
</td>
<td>
<p>-0.6072* </p>
</td>
<td>
<p>0.6071*</p>
</td>
<td>
<p>-0.0247</p>
</td>
<td>
<p>0.7126*</p>
</td>
<td>
<p>0.0239 </p>
</td>
<td>
<p>0.7540* </p>
</td>
<td>
<p>1.0000</p>
</td>
</tr>
</tbody>
</table>
<p>Source: researcher’s computation.</p>
<p>Table 5 shows the correlation between taxation payable and IFRS adoption. It was found that PBT has a positive
stimulus on taxation payable (0.3600). DEPR declared a negative insignificant nexus on tax payable (-0.0310). This
demonstrated that the greater the impairment of assets through depreciation, the lesser the tax payable to the
government. SHDFUD has a positive significant nexus with taxation, since when shareholders’ funds increase,
profitability will rise which in turn will increase assessable profit, thereby incrementing tax payable. LGTDEBT also
reduces tax payable as shown in Table 5 (-0.0482). This clearly showed that company aggressiveness on financing
reduces taxation when debt is greater than equity. TOTLIAB also displayed a negative significant nexus with tax
payable (-0.4477*). NONCURASET in the same vein displayed a negative significant nexus with tax payable, and this
revealed that investment in NONCURASET reduces tax payable through capital allowance, by which companies circumspectly
and legally circumvent tax payment. No multicollinearity existed among the variables because their correlation values
are less than 0.8 where multicollinearity exists.</p>
<h3>4.1. Discussion of findings</h3>
<p>The results obtained from the analysis proved that there is a positive effect of PBT on taxation, as suggested by
Haverals (2007). This demonstrated that the higher the PBT declared by the organisation, the higher the tax payable to
the government. Depreciation, as was revealed, reduces taxation because the wear and tear of assets led to the
inefficiency of the operation in an organisation which in the long run deters increased profitability which is the
prerequisite determinacy of tax payable. Additionally, an increase in SHDFUD reduced taxation which is tantamount to
the negative effect of SHDFUD on taxation. The maximization of shareholders’ wealth objective of the organisation
circumspectly paved the way for the legality of tax avoidance because additional shareholders’ funds caused lower
profits as supported by Abedana et al. (2016). LGTDEBT negatively affects Taxation, as any company that is
aggressively financed experiences a reduction in assessable profits because the income realised as a profit is spent
on loan repayments and interest which are deductible from assessable profit. Moreover, a unit rise in TOTLIAB reduces
TAXATION as stated by Yapa et al. (2015), who predicted a negative effect on TAXATION. NONCURASET reduces taxation
because the procurement of new assets attracts capital allowance such as initial, investment and annual allowance
which are deductible from the assessable profit of the organisation. The higher the procurement of NONCURASET, the
lesser the assessable profit which is in line with tax payable reduction. </p>
<h2>5. Conclusion and recommendations</h2>
<p>This study examined the IFRS adoption effect on the companies’ tax payable from 2012 to 2018. The data gathered from
annual reports of fifty selected Nigerian listed companies were scrutinised employing PPMC and panel data methodology
to quantify the IFRS adoption effect on tax payable. This revealed that PBT caused a significant positive effect on
TAXATION, whilst DEPR, TOTLIAB, SHDFUD, LGTDEBT and NONCURASET impacted on TAXATION negatively. This showed that an
increase in DEPR, TOTLIAB, SHDFUD, LGTDEBT and NONCURASET decreased taxation in an entity. Conclusively, IFRS adoption
significantly reduced organisation tax payable because organisations circumspectly and lawfully circumvent or reduce
the tax payable through depreciation claimed on existing assets, procurement of new noncurrent assets, and long-term
debt (leverage) as shown by Yapa, et al. (2015). It is advocated that there should be monitoring mechanisms or devices
put into motion by the government to monitor organisations’ procurement, impairment of assets and debts acquired
transparently, in order to deter unnecessary and artificial reductions in tax payable.</p>
<p>The results are supportive for countries that have adopted IFRS and are also reliant on exports, oil extraction and
industry in understanding the dynamic IFRS adoption effect on taxation income. However, the pertinent contributions of
study are that it employed Panel models through Fixed, Random, and pooled methods to display the IFRS adoption effect
on taxation. This study is relevant to government officials responsible for tax collection, and for taxation
policymakers in order to comprehend the bottlenecks caused by the IFRS adoption on loopholes for legal and lawful tax
avoidance by the manufacturing sector. This paper has some limitation, first and foremost, the sample data obtained
from annual published reports were scant. Secondly, the data custodians’ attitude toward releasing the crucially
needed data constricted and elongated the duration of this research. </p>
<p>The findings were established based on scientific literature and the selected manufacturing companies examined,
therefore it is recommended that subsequent research expands the knowledge on this aspect of the study. The subsequent
study can be extended to banks, education, the mining industry and agricultural sectors in Nigeria to gauge the effect
of IFRS adoption effect on tax payable. Additionally, the IFRS adoption effect on bank performance can also be
investigated because it is pertinent.</p>
<p>References</p>
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<p>WPŁYW IMPLEMENTACJI MIĘDZYNARODOWYCH STANDARDÓW SPRAWOZDAWCZOŚCI FINANSOWEJ <br />NA WYSOKOŚĆ OPODATKOWANIA
NIGERYJSKICH PRZEDSIĘBIORSTW PRODUKCYJNYCH</p>
<p>Streszczenie: W artykule przedstawiono wyniki badań nad wpływem zastosowania przez nigeryjskie przedsiębiorstwa
produkcyjne MSSF na ich wysokość opodatkowania w latach 2012-2018. Podstawą analizy były dane z raportów rocznych 50
wybranych nigeryjskich spółek giełdowych. Dane przeanalizowano z zastosowaniem metodologii PPMC i analizy danych
panelowych. Badania pokazały, że zysk przed opodatkowaniem miał pozytywny i znaczny wpływ na wysokość zobowiązania
podatkowego, a amortyzacja, kapitał własny, zobowiązania długoterminowe i aktywa trwałe – negatywny. Zatem wzrost
amortyzacji, kapitałów własnych, zobowiązań długoterminowych i aktywów trwałych zmniejszył wysokość podatku w
analizowanych firmach produkcyjnych. Przyjęcie MSSF znacznie obniżyło zobowiązania podatkowe przedsiębiorstw
produkcyjnych, gdyż podmioty te ostrożnie i zgodnie z prawem obchodziły lub zmniejszały podatek, wykorzystując odpisy
amortyzacyjne oraz zobowiązania długoterminowe (stosując dźwignię finansową). Autorzy zalecają wprowadzenie przez rząd
mechanizmów monitorujących, aby kontrolować zamówienia firm, utratę wartości aktywów i nabytych długów w sposób
przejrzysty w celu powstrzymania sztucznego obniżania zobowiązań podatkowych.</p>
<p>Słowa kluczowe: amortyzacja, opodatkowanie, kapitał własny, zobowiązania długoterminowe, aktywa trwałe, MSSF (IFRS).
</p>