THE EFFECT OF TAXATION ON BUSINESS DECISION (A CASE STUDY OF GUINNESS BREWERIES, ONITSHA)

THE EFFECT OF TAXATION ON BUSINESS DECISION (A CASE STUDY OF GUINNESS BREWERIES, ONITSHA)

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The two primary objectives of every business are profitability and solvency. Profitability is the ability of a business to make profit, while solvency is the ability of a business to pay debts as they come due. (Hermanson et al, 1992: 824). However, the achievement of these objectives requires efficient management of resources of the business through planning, budgeting, forecasting, control, and decision – making. Also, the strengths and weakness of the
business need to be identified and necessary corrective measures applied. Interestingly, accounting provides information that facilitates these functions. Every profit oriented organization is faced with three (3) major business decisions to make every day as far as finance is concerned. Investment, financing and
dividend decisions are the major decisions firms have to tackle everyday in-order to survive. These decisions are greatly influenced by assets, liabilities, expenditures and the capital structure of an organization. Tax which is a form of liability is a broad area in management, and financial account, and it is handled with care as the financial position of every business organization will definitely be affected based on how tax matters are managed.
The ability of an organization to effectively and efficiently employ various techniques to avoid and reduce tax burden is imperative. Considering how tax can affect the success of an organization, it is therefore important for financial managers and accountants to apply efficient legal tax avoidance techniques. Reducing tax liability is similar to reducing expenses. If tax liabilities are efficiently managed, more revenue generated by the organization will be invested in other areas of the business to speed up growth and expand the business. Just like expenses, tax liabilities incurred by an organization over a period of time affects its business decisions. Every individual and corporation within Nigeria is taxed on income incurred. Tax liabilities must be paid every year, and failure to file or pay taxes can subject an individual or organization to penalties including fines, interest and even possible jail time. For most companies and businesses, paying tax is a necessary evil and the aim is to reduce the amount of taxes owed as much as possible. Thus the impact of tax on business decision usually comes down to how to reduce taxes as much as possible on income earned.

THE EFFECT OF TAXATION ON BUSINESS DECISION (A CASE STUDY OF GUINNESS BREWERIES, ONITSHA)