EFFECTS OF CORPORATE INCOME TAX ON THE PROFITABILITY OF MINING COMPANIES: EVIDENCE FROM GHANA STOCK EXCHANGE
- corporate income,
- stock exchange,
Copyright (c) 2018 IJRDO - Journal of Business Management (ISSN: 2455-6661)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
The tax rate of the mining sector in Ghana is viewed to be too high and has adverse effects on the profitability of mining firms in the country. There has been an outcry for the government to find ways to help curb this problem as mining companies in the country might become uncompetitive or even fold up if not checked.
This study investigates the impact that corporate income tax has on profitability of mining companies in Ghana using ten years data from the year 2005 to 2014 with a sample of the only two listed mining firms on the Stock Exchange as at the time of the study.
Return on assets was used as proxy for profitability as against corporate income tax which is the independent variable whereas company size, liquidity, leverage and growth were considered as control variables. The regression results showed that corporate income tax negatively influences profitability; whereas company size positively associates with profitability and liquidity, leverage and growth negatively impacted profitability. It was therefore recommended that government introduces the sliding scale method of taxation in the mining sector in order to make mining firms remain profitable whiles minor mining firms seek to increase their size of operations to be more competitive and profitable.
Abdallah, A.N. (2008).Taxation in Ghana, Principles, Practice and Planning. 2nd edition. (Unpublished).
Akabzaa, T. and Ayamdoo, C (2009). Towards a fair and equitable taxation for sustainable development financing in Africa, public agenda.
Akabzaa, T. M. (2009). Mining in Ghana: Implications for National Economy Development and Poverty Reduction. In Bonnie Campbell (Ed.) Mining in Africa, New York: Pluto Express.
Al-Shamaileh, M.O. and Khanfar, S.M. (2014). The effect of the financial leverage on the profitability in the tourism companies (Analytical study- Tourism sector-Jordan), Macrothink institute. Vol.4, No.2
Appiah, H.L 2013). Tax reforms and revenue mobilization. A case study of the mining sector of Ghana, University of Ghana, Legon.
Azeez, A. and Tunji, A.I. (2015). Relationship between corporate tax and profitability: a case study of Oando plc. International Research Journal of Education and Innovation (IRJEI) Vol.1 No. 6
Bannock, G., Baxter, R. and Rees, R. (1998). Penguin Dictionary of Economics (6th Ed.), Middlesex: The Penguin Books Ltd.
Beigi, M.R., Rafat, B. & Panah, H.M. (2013). The analysis of the effect of tax on profitability indices in listed companies of Tehran Stock Exchange. European Online Journal of Natural and Social Sciences. vol.2, No. 3(s), pp. 86-98
Boakye, E.K. (2011). Assessing the challenges of tax revenue mobilization in Ghana: a case of Sunyani municipality: Kwame Nkrumah University of Science and Technology
Boateng, K.A. (2014). AngloGold Obuasi retrenchment: facts and figures. Retrieved from: http://citifmonline.com/2014/05/23/anglogold-obuasi-retrenchment-the-facts-and-figures/
Bokhari, J., C., Hudson, R., and Keasey, K. (2005). The Predictive ability and Profitability of tech¬nical trading rules: Does company size matter? Economics Letters, 86, 21-27.
Cairns, R. D. (1985). Reform of exhaustible resource taxation. Canadian Public Policy, 11, 649-58.
Chude, D.I. and Chude, N.P. (2015). Impact of company income taxation on the profitability of companies in Nigeria: a study of Nigerian breweries. European Centre for Research Training and Development UK. Vol.3, No.8, pp.1-11,
Colin F, Buglear J, Lowry D, Mutch A, Tansley C. (2007). Researching and uniting a dissertation: A guide book for students, 2nd edn. Prentice Hall, London
Dalton, H. (1920). The Measurement of the Inequality of Incomes. Economic Journal 30 pp348
Devinaga, R. (2010). Theoretical Framework of Profitability as Applied to Commercial Banks in Malaysia. European Journal of Economics, Finance and Administrative Sciences available. Retrieved from: http://www.eurojournals.com
Dewett, K.K. Navalur, M.H. & Janmejoy, K. (2005). Modern Economics theory, New Delhi, S. Chand and Company Ltd, Diamond Jubilee Ed.
Ezugwu, C.I. and Akubo, D. (2014). Analysis of the effect of high corporate tax rate on the profitability of corporate organization in Nigeria- A study of some selected corporate organizations. Mediterranean journal of social sciences: MCSER publishing, Rome-Italy. Vol. 5 No.20. Doi:10.5901/mjss.2014.v5n20p310
Ghana, Internal Revenue Act 2000 (Act 592)
Ghana, Minerals Commission (2006). Mineral Commission Statistics on Minerals Production. Accra: Minerals Commission
Karkrah, A.K. and Ameyaw, A. (2010). Determinants of Bank’s Profitability in Ghana, working paper: Blekinge Tekniska Högskola. Retrieved from: http://www.camessays.com/upload/doc/Thesis%20bank.pdf date visited (13-07-2012)
Koranteng, K.A. (2014). Goldfields Ghana cries loud over unfair tax regimes in Ghana’s mining industry. Ghanaweb, Article 315369. Retrieved from http://mail.ghanaweb.com/GhanaHomePage/features/artikel.php?ID=315369
Lindahl, E. (1919). Just Taxation-A Positive Solution trans. E Henderson, in R.A. Musgrave and A.T. Peacock (eds.) Classics in the Theory of Public Finance. Macmillan, London 1958.
Margaritis D. and Psillaki M. (2007). Capital Structure and Firm Efficiency, Journal of Business Finance & Accounting (34), pp. 1447-1469.
Margaritis D. and Psillaki M. (2010). Capital structure, equity ownership and firm performance, Journal of Banking & Finance (34), pp. 621- 632.
Nunes P. J. M., Serrasqueiro Z. M. and Sequeira T. N. (2009). Profitability in Portuguese service industries: a panel data approach, The Service Industries Journal (29), pp. 693-707.
Otto, J., Batarseh M.L. and Cordes J. (2000). Global Mining Taxation Comparative Study Oxfam America/ISODEC (2009) Ghana‘s big test: Oil‘s challenge to democratic development. Report, Feb., 2009
Pigou, A.C. (1920). A study in public finance, London: Macmillan.
PriceWaterhouseCoppers (2007). Metals and Mining. Review of global trends in the mining industry.
Quashie, P (2009). The Role of Value Added Tax in the economic development of Ghana- a case study of Vat Service, Ho Municipality. Kwame Nkrumah University of Science and Technology Institute of Distance Learning
Saunders, (2007). Research Methods for business students
Slemrod, J. (1992). Why people pay taxes? Tax compliance and enforcement, Ann Arbor, University of Michigan Press
Wanzenried, D. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland, Journal of International Financial Markets, Institutions & Money; pp.307-327. Retrieved from: http://www.sciencedirect.com.www.baser.dk/science/article/pii/S1042443110000831
Zeitun R. and Tian G. (2007). Capital structure and corporate performance evidence from Jordan, Australasian Accounting Business & Finance Journal (1), pp. 40-53.