Abstract
Tax incentives is an inbuilt expansionary tax fiscal policy that has the capacity to boost economic growth and prosperity. The scheme over time has been undermined, misused and abused by the relevant quarters. This study tends to rekindle the need and opportunity available in sincere implementation of tax incentives aids available to listed manufacturing firms in Nigeria. The study specifically examined the effect of tax incentives proxied by tax holiday, loss relief, capital allowance and tax credit on profitability of listed manufacturing firms in Nigeria; assessed the impact of tax incentives on market value; evaluated the influence of tax incentives on liquidity and analysed the effect of tax incentives on operational efficiency of listed manufacturing firms in Nigeria. The population of the study consisted of thirty-four (34) consumers and industrial goods firms listed on Nigerian Exchange Group (NGX). Purposive sampling technique was used in selecting 20 firms for a period of twelve years from 2012 to 2023. Secondary data on variables such as tax holiday, loss relief, capital allowance, tax credit, profitability, liquidity, market value and operational efficiency were obtained from the audited annual reports of the sampled firms and website of Nigerian Investment Promotion Commission (NIPC). Descriptive statistics, correlation analysis, variance inflation factors and Dynamic Generalised Methods of Moment were employed as data analysis techniques. The result from objective one revealed that tax incentives proxied by annual allowance (t= 0.1920, p<0.05), loss relief (t= 1.0652, p<0.05) and tax holiday (t= 0.5555, p<0.05) had positive and significant influence on profitability measured by net profit margin. Results from objective two showed that annual allowance (t-stats = 0.7394 p<0.05), tax holiday (t= 0.8216, p<0.05) and tax credit (t= 1.6872, p<0.05) exerted positive and significant influence on Tobin’s Q which is an index of market value. The result of objective three disclosed that loss relief (t= -0.7258, p<0.05), tax holiday (t= -2.7772, p<0.05), tax credit (t=-6.0322, p<0.05) had negative and significant effect on current ratio a proxy of liquidity. Outcome from objective four revealed that annual allowance (t= 4.8056, p<0.05), loss relief (t= 2.7903, p<0.05), tax holiday (t=1.2742, p<0.05) and tax credit (t= 0.0966, p<0.05) had a positive and significant effect on asset turnover an index of operational efficiency. The study concluded that tax incentives have significant effect on financial performance of listed Nigerian manufacturing firms. It further recommended that policymakers should implement targeted incentive schemes or strategic incentive plans that target particular industries, or a strategic tax incentive that adds value or benefits the economy by expanding the manufacturing sector and reducing the tax burden in a way that increases demand for domestic goods in Nigeria.