Impact of Corporate Taxation on Profitability of Selected Companies – An Empirical Investigation
Keywords:
Corporate taxation, Statutory tax, Effective tax, Tax savings, Return on Assets, Control variables, Correlation analysis and Regression analysisAbstract
The present paper is aimed at empirically evaluating the effect of corporate taxation on profitability of the selected companies under manufacturing and service sectors in India using financial data from the year 2001-02 to 2016-17. The pharmaceutical companies under manufacturing sector and hotels under service sector are considered for the study. Return on Assets (ROA) is used as proxy for profitability and statutory tax, effective tax and tax savings are the variables for corporate taxation. Correlation and Multiple regression analysis are used to analyze the data. In the regression, profitability is the dependent and tax variables are independent. Apart from tax variables, the firm characteristics such as financial risk, growth, size, tangibility, liquidity, non-debt tax shield. It is found from the results of the analysis that the profitability is affected by effective tax and tax savings but not by statutory tax.
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