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The study examined the impact of corporate income tax on the profitability of firms in the hospitality industry in Lagos State. The study succinctly explored the effect of corporate income tax on the net profit margin, profit after tax, and cost of operations of the Eko Hotel and Suites, which was used as the sample for the study between 2009 and 2016. Data were sourced from the financial statements of the sampled firm within the period and analyzed via regression analysis. Results of the study revealed that corporate income tax has a significant impact on profit after tax (p<.05); net profit margin (p<.05) and cost of operations (p<.05). Based on this, the study suggests that the government should devise means of eliminating the incidence of double taxation, which tends to weigh down the profitability of private firms in the industry.




Taxes are considered a problem for everyone. Not surprisingly, taxation problems date back to the earliest recorded history. The basic principles of taxation are nearly as old as human society—the history of taxes stretches thousands of years into the past. The earliest trace of taxation in Nigeria was believed to have started from the Northern part of Nigeria and this was before the advent of British administration. The emirs had organized forms of administration and their Islamic relation made it possible for people to contribute towards the charity which laid a solid foundation for direct taxation in Northern Nigeria. Prior to 1900, some of the levies were “Zakat (a tax on the moral property meant for charity), Jangali (tax on livestock), Gado (death tax), Jizjah (tax on slaves), etc these were recognized in Northern Nigeria, (Onwubiko,1998).

There was also some form of taxes in Southern Nigeria (Yoruba parts) by way of tributes (isakole), tolls, levies, fees, and presents given to Obas (Kings), Chief in Benin, Oyo, and some other Yoruba Kingdom of Western Nigeria. However in the east, this type of tax-paying tradition was virtually non-existing but except fine called “Iri-iwu” due, mainly to lack of organized central authority. In which the eastern Nigerians are known for their Egalitarian society. These forms of taxation come to a halt with the advent of colonial masters. The Oba’s and emirs were now used in imposing taxation on their subjects and anyone found guilty were punished,(Onwubiko,1998).

 Taxation in modern times is said to be an economic development tool that provides the financial base for providing public goods. It is a double-edged sword depending on what is the interest of the government in power. Also, it is a compulsory payment by individuals and organizations to the relevant inland or internal revenue authorities at Federal, State, or Local Government levels. Taxes perform fiscal or budgetary functions, economic functions, and social or redistribute functions.

The hospitality industry is a broad industry covering various hosting services including restaurants, hotels, bars, cruise lines, and many other related businesses. Globally it is a multi-billion dollar industry with broad offerings, in Nigeria, the best of hospitality development is found in accommodations and restaurants. The hospitality market is booming in Nigeria and with that boom comes newfound diversification in a new range of quality and classifications yet there is much more room for growth, diversification, and standardization,(Oruruo,2014).

In Nigeria, the Corporate Income tax rate is a tax collected from companies. This amount is based on the net income companies obtain while exercising their business activity, normally during one business year.  Revenues from the Corporate Tax Rate are an important source of income for the government of Nigeria It is also an assessment levied by a government on the profits of a company.  Hereby causing an extra reduction in the possible net profit of the company after normal company expenses have been deducted before attaining the net profit it is the further reduction in the net profit which is usually 30% of the net profit assessed on a preceding year basis.


However, Players in the hospitality business in the country have said multiple taxations are stifling the development in the sector. The operators insisted that the current burden of taxes and levies are heavy on them, especially when situated within the context of the high operating cost for business, maintaining that these charges have pushed the sector to the brink. Some of the taxes and levies identified by the operators included Registration of Hospitality Premises, Stamp Duty, Nigerian Social Insurance Trust Fund(NSIT), Industrial Training Fund(ITF), National Pension Commission(PENCOM), Nigerian Tourism Development Corporation(NTDC). Others are Company Income Tax, Withholding Tax, Liquor License, Food Handlers and Health Certificate, Visual Advert, Waste Disposal, Bill Board, Sign Post, Operation Permit, Vehicle Emission Fee, Contravention Charges, Business Premises, Administrative Charges for Environmental, Audit, Copyright Society of Nigeria(COSON), water supply, electricity supply, copious levies by the Local Government Councils as well as other fees charged by regulatory agencies across the sectors at the state and federal levels. Taking a look at all the fees, levies, and forms of taxes the companies in the hospitality industry have to pay, not to mention the corporate income tax they have to pay after ascertaining their net profit, all pose a threat to companies in this sector which is a viable and very profitable industry to venture into. All these pose a threat to these companies because looking at the actual profit and the later deductions there is a wide gap between what they pay as taxes on their profit and the profit they take home.


The aim of this study is to determine the relationship between corporate income tax and the profitability of the hospitality industry in Nigeria. However, the key objectives include;

to examine the relationship between company income tax and cost of operation to ascertain corporate income tax influence on PAT to compare the corporate income tax influence on NPM of accommodation and restaurants


In relation to attaining the set objectives, the study must be able to adequately answer the following questions

To what extent does corporate income tax influence the cost of operations of major sectors in the hospitality industry? Does corporate income tax influence PAT? is there any significant difference in corporate income tax influence and NPM of accommodation and restaurants?


In order to ascertain or accomplish the objectives of this research and provide answers to the research questions, there is a need to establish testable hypotheses.

Hypothesis One

H0: Company income tax does not significantly influence the cost of operations in the hospitality industry

Hypothesis Two

H0: Corporate income tax does not significantly influence the PAT of accommodation and restaurants

Hypothesis Three

H0: There is no significant difference between corporate income tax influence and NPM of accommodation and restaurants


The hospitality business in Nigeria is now peaking at N562 billion as of last year. This was disclosed by SlimTrader, West Africa Vocation Education(WAVE), a technology/e-commerce solution provider, in a chat with Vanguard Femi Akinde, Managing Director, SlimTrader, said:   “The Hospitality industry in Nigeria is worth approximately  N562 billion ($3billion) in 2014 and still growing, (Ekwujuru, 2015) This study, therefore, will be carried out to know the extent to which taxation affects stakeholders in the


This study covers company income tax and profitability of the accommodation and restaurant sub-sectors of the hospitality industry over a period of 5 years.


Companies Income Tax(CIT):

the corporate income tax rate is a tax collected from companies. Its amount is based on the net income companies obtain while exercising their business activity, normally during one business year

Assessment Authority: 

This is the body appointed by the board for the purpose of assessing tax payable.

Company: A company is defined by section 3(1) of the act as “any co-operation(other than a corporation sole) established by or under any law in force in Nigeria or elsewhere”. The relevant tax authority in respect of company income tax is the Federal Board of inland revenue.

Federal Inland Revenue Sevice (FIRS):-                                                               

This is the body set up by section 5.1 of ITA (1979) and charged with the overall administration of the companies income tax act.

Income:  There is no statement that defines the word `` income`` in taxation status. However, for the purpose of this study reference is made to section 5.4 (2) (6) of the income tax management act (ITMA)1961, which recognizes income as including any amount deemed to be income under the act. 

Tax Arrears   These are an assessment of tax during the preceding period whose payment is received at the current assessment period.

Profit After Tax:

The net amount earned by a business after all taxation related expenses have been deducted. The profit after tax is often a better assessment of what a business is really earning and hence can use in its operations than its total revenues.

Net Profit Margin:

The net profit margin is the percentage of revenue left after all expenses have been deducted from sales.


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