Sustainable Tax Refund and Financial Performance of Small and Medium Scale Enterprises (SMEs) in Nigeria
Authors: Ogbonna, Helen Nneka, Echezonabugu, Emmanuela Chioma, Nwabuisi, Anthony Okorie
Journal: International Journal of Financial Economics and Accounting (IJFEA), ISSN 3023-3615
Citation: IJFEA 6(1): 1-10, 2026-03-07.
DOI: 10.5281/zenodo.18901976
PDF: Download full-text PDF
Type: Original Research
Abstract
This study examined sustainable tax refund and financial performance of Small and Medium Scale Enterprises (SMEs) in Nigeria over a ten-year period (2016–2025). Specifically, the study examined how tax refund amount (TRA), tax refund ratio (TRR), and deferred tax refund (DTR) affect profit for the year (FP). An ex post facto research design was adopted, and secondary data were sourced from the audited annual reports and tax disclosures of selected SMEs, including Innoson Technical and Industrial Company Limited, Cutix Plc, and A.G. Leventis Nigeria Plc. Descriptive statistics and Panel Least Squares regression analysis were employed to analyze the data. The findings revealed that tax refund amount has a positive and statistically significant effect on profit for the year (β = 9.189; t = 32.361; p = 0.000), indicating that higher tax refunds directly enhance SME profitability by improving liquidity and operational capacity. Tax refund ratio was also found to have a positive and significant effect on profit (β = 554,097.1; t = 16.325; p = 0.000), suggesting that efficient utilization of tax refunds relative to taxes paid contributes substantially to financial performance. In contrast, deferred tax refund exhibited a positive but statistically non-significant effect on profit (β = 0.664; t = 0.665; p = 0.512), implying that recognition of refunds not yet received does not significantly impact profitability. The model’s Adjusted R² of 0.7975 indicates that about 79.8% of variations in SME profitability are explained by tax refund variables, while the Durbin-Watson statistic of 2.001 suggests no evidence of autocorrelation. The study concludes that sustainable and efficiently managed tax refund practices significantly enhance the financial performance of SMEs in Nigeria, with actual receipt and utilization of refunds being more critical than deferred recognition.
Keywords
Sustainable Tax Refund, Tax Refund Amount, Tax Refund Ratio, Deferred Tax Refund, Profit for the Year, SME Financial Performance Cite as: Ogbonna, H. N., Echezonabugu, A. O.
Full Text
This study examined sustainable tax refund and financial performance of Small and Medium Scale Enterprises (SMEs) in Nigeria over a ten-year period (2016–2025). Specifically, the study examined how tax refund amount (TRA), tax refund ratio (TRR), and deferred tax refund (DTR) affect profit for the year (FP). An ex post facto research design was adopted, and secondary data were sourced from the audited annual reports and tax disclosures of selected SMEs, including Innoson Technical and Industrial Company Limited, Cutix Plc, and A.G. Leventis Nigeria Plc. Descriptive statistics and Panel Least Squares regression analysis were employed to analyze the data. The findings revealed that tax refund amount has a positive and statistically significant effect on profit for the year (β = 9.189; t = 32.361; p = 0.000), indicating that higher tax refunds directly enhance SME profitability by improving liquidity and operational capacity. Tax refund ratio was also found to have a positive and significant effect on profit (β = 554,097.1; t = 16.325; p = 0.000), suggesting that efficient utilization of tax refunds relative to taxes paid contributes substantially to financial performance. In contrast, deferred tax refund exhibited a positive but statistically non-significant effect on profit (β = 0.664; t = 0.665; p = 0.512), implying that recognition of refunds not yet received does not significantly impact profitability. The model’s Adjusted R² of 0.7975 indicates that about 79.8% of variations in SME profitability are explained by tax refund variables, while the Durbin-Watson statistic of 2.001 suggests no evidence of autocorrelation. The study concludes that sustainable and efficiently managed tax refund practices significantly enhance the financial performance of SMEs in Nigeria, with actual receipt and utilization of refunds being more critical than deferred recognition.