Ilomata International Journal of Tax & Accounting P-ISSN: 2714-9838; E-ISSN: 2714-9846 Volume 5, Issue 4 October 2024 Page No. 1-16 1 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Emmanuel Imuede Oyasor1 1Walter Sisulu University, South Africa. Correspondent: emmanueloyasor247@gmail.com1 INTRODUCTION Corporate social responsibility (CSR) is a moral obligation which, sometimes, conflicts with the firms’ profitability objective. Gribnau (2015) notes that companies endorsing CSR accept ethical obligations “beyond compliance with the law. The sustained interest being shown by organizations Received : July 15, 2024 Accepted : October 10. 2024 Published : October 31, 2024 Citation: Oyasor, E.I. (2024). Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria. Ilomata International Journal of Tax and Accounting, 5(4), 175-183. https://doi.org/10.61194/ijtc.v5i4.1665 ABSTRACT: The study investigated the relationship between community responsibility and effective income tax rate of listed insurers in Nigeria; determined the relationship between environmental responsibility and effective income tax rate of listed Insurers in Nigeria; examined the relationship between ethical responsibility and effective income tax rate of listed insurers in Nigeria; examined the relationship between firms’ diversity and effective income tax rate of listed insurers in Nigeria The ex-post facto research design was employed and on published sourced from the Audited Annual Reports of the Listed Insurers between the periods of 2013-2022. The data were pre-tested using descriptive statistics, stationarity (unit) root test, Johansen co- integration. The hypotheses were analyzed using fixed effect (panel data). The findings revealed that (p=0.8909>0.05) which indicated that there is not enough evidence to reject the null hypothesis one. Thus, community responsibility has no significant relationship with effective income tax rate of listed insurers in Nigeria. Similarly, the environmental responsibility indicated (p=0.4889>0.05) on effective income tax rate, which implied that environmental responsibility has no significant relationship with effective income tax rate of listed insurers in Nigeria. Ethical responsibility depicted (P=0.4801>0.05) on effective income tax rate, which implied that the ethical responsibility has no significant relationship with effective income tax rate of listed insurers in Nigeria. And Firms’ diversity showed (p = 0.7930 < 0.05) effective income tax rate, which revealed that the firms’ diversity has no significant relationship with effective income tax rate of listed insurers. The study concluded that community responsibility, environmental responsibility, ethical responsibility and firms’ diversity have no connection with corporate income tax of the listed insurance companies. Keywords: Community Responsibility, Environmental Responsibility, Ethical Responsibility And Firms’ Diversity, Effective Tax Rate This is an open access article under the CC-BY 4.0 license. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg mailto:emmanueloyasor247@gmail.com1 https://doi.org/10.61194/ijtc.v5i4.1665 Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 2 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc in CSR is a continued attempt to satisfy the expectations of various stakeholders. There have been civic, labor, ecological, and product factors. Ecological factors concentrate on investment in a safe and habitable environment or doing business in a manner that allows the environment to remain sustainable. These lines of thought signpost a good part of the Sustainable Development Goals (Obaideen et al., 2022). In Nigeria, most firms, especially insurance companies are deemed to be socially responsible and at the same time consider CRS as one of the tax planning strategies. The main reason for insurance business to make the economy more resilient for the people (Oyetunji et al., 2021). Corporate taxes in Nigeria are not fully utilized for it purposes due to bad governance and corruptions. As a result, most insurers prefer to invest in CSR to socially and economically safeguard the lives and properties of their insureds (Olaleye, 2022). This would lower risk exposure to the public and in turn reduce the burden of claim to be paid by the insurers. For instance, a motor liability insurance company with large number of policyholders would prefer to invest on road constructions and rehabilitations to reduce risk burdens, because if the corporate tax is paid, it may not deliver the road because of bad government. CSR enhances financial growth of insurers and in the same vein serves as tax-deductible as recommended in Section 25 of the Companies Income Tax Act (CITA) (Olaleye, 2022). It has been argued that being CSR compliant can put an organization at a less vantage competitive position than the ones that are not (Itotenaan et aal., 2022). The primary focus of CSR is a redefinition of the objective of the firm from the more common motive of making a profit to making it in a manner that can be described as fair and environmentally sustainable. This raises a question of management and control of CSR given that the law does not expressly demand all angles of CSR from corporate organizations (Carroll on Sunday & Adenike 2016) Therefore, it becomes necessary to investigate impact of CSR practices on corporate income tax of listed insurance in Nigeria. In the insurance sector, CSR applies the role of providing financial assistance to people in the event of a disaster, as well as sharing expertise in solving environmental problems, maintaining social security and promoting human rights. In Nigeria, most insurance companies have seen investment on CSR as a way of evading tax. They tend to inflate the investment amount to quantify the level of taxes to be waived. This practice is unethical (Olaleye, 2023). The CSR investment policy framework is not effective that most insurers discovered and used against revenue generation. Another issue with CSR is the non- disclosure of CSR activities as well as false disclosure of profits by the insurance company performance to dodge tax. They do have two separate annual reports, one for government for tax purposes and the other for stakeholders for returns purposes. The former is usually falsified to lowering the level of tax to pay while the latter shows the normal profits realize over a fiscal year (Olaleye, 2023). Most previous studies have considered government institutions which include (Mas’ud et al., 2020; Amrie & Riska, 2020; Lanis & Richardson 2015; Gugong & Ayuba, 2018). None of the studies examined CRS practice on corporate income tax, especially insurance companies in Nigeria. This study uses listed insurers in Nigeria to understudy their CRS practice on corporate income tax. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 3 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Legitimacy Theory The theory postulates that there should be mutual co-existence and understanding between the companies and their host communities, the business entities must rely on societal legitimacy to operate; business entities normally cannot succeed without the society as well as the cooperation and understanding of other stakeholders in the society. The corporate entities’ value systems must be in consonance with that of the society since the entities must produce goods and services that must be accepted by the society. The social contract between the companies and their host communities or the society must be respected for them to operate smoothly. The social contract reflects the expectations of the society from the business entities. Many authors have shown support for the legitimacy theory including, Bissadu et al. (2017). Other authors such as Munoz et al. (2017), and Izzo et al. (2020) questioned the veracity of the theory, stating that the expectations of the stakeholders or the society from corporate bodies are open-ended and sometimes unattainable, which makes it impossible for companies to meet up. The relevance of the legitimacy theory is that it explains the interconnectedness between the company, its stakeholders and the society at large. Benefit Theory The theory, from Eric Lindahl (1919) assumes that the government has another source of infrastructure funding, and that the burden will now be passed on to the citizen. The theory assumes that taxpayers and the state have an exchange or contractual relationship. Members of society contribute to the cost of certain goods and services provided by the state in proportion to the benefits received. Issues like equitable income and wealth distribution have no place in this quid pro quo arrangement. Instead, the benefits received are used to determine how the tax burden should be distributed. Eric-1919 believed that levying taxes on this principle as stated would result in justice. The model has been criticized that benefit-based taxation will not generate much revenue for the government because, as previously stated, many people who can afford to pay high taxes may end up paying less tax simply because they do not receive much benefit from government spending. if the state maintains a certain connection between the benefit conferred and the benefits served, it will be against the principle of tax as it is compulsory contribution made to the public authorities to meet the expense of the government and for the provision of general infrastructures to all and; Another flaw of benefit theory is that most of the expenditures incurred by the state are for the general benefits of the citizen. Ability to Pay Theory The theory was propounded in 1939 by M. S. Kendrick. According to this theory, every taxpayer should be taxed based on his or her ability to pay. People with higher incomes, according to this theory, should pay more taxes than people with lower incomes. In this case, taxes should be levied based on an individual's taxable capacity. This approach considers tax liability in its purest form, as a mandatory payment to the government with no strings attached and does not assume any commercial or semi-commercial relationship between the government and the individuals. Individuals must pay taxes simply because they can, and their relative share of the total tax burden https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 4 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc is determined by their ability to pay. The rationale behind the theory is that it ensures tax justice or equity on taxpayers: taxes are based upon the amount of money people earn. The paper tests the following research hypotheses: 1. Community responsibility has no significant impact on effective income tax of Nigerian insurers. 2. Environmental responsibility has no significant impact on effective tax rate of Nigerian insurers. 3. Ethical responsibility has no significant impact on effective income tax rate of Nigerian insurers. 4. Firms’ diversity has no significant impact on effective income tax rate of Nigerian insurers. The study investigates the impact of examine impact of CSR practices on corporate income tax of listed insurance in Nigeria. First, we examine the impact of community responsibility on effective income tax rate of listed insurers, second, we assess the impact of environmental responsibility on effective income tax rate of insurers. Third, we determine how ethical responsibility affect effective income tax rate of insurers. And lastly, we confirm how firms’ diversity impact effective income tax rate of insurers in Nigeria. The findings show that community responsibility has no significant relationship with effective income tax rate. Moreso, the insurers’ environmental responsibility has no significant relationship with effective income tax rate. Lastly, ethical responsibility has no significant relationship with effective income tax rate of listed insurers in Nigeria. The outcome provides insurers to understand the linkage between their respective firms’ CSR investments and corporate income taxes. The findings enlighten stakeholders, including corporations, on the significance of CSR practices and aid them in effective managerial decision-making. It educates the government on the useful channel for the improvement of policy on effective tax rate. Its informative for firms on understanding fair return on capital invested through improved efficiency. We structure the reminder of the paper as follows. Section two presents literature, section three offers methodology. Section four discloses the results and section five concludes. METHOD To establish the impact of corporate social responsibility on corporate income tax in Nigeria, the study is based on the Legitimacy theory. Ogunode (2022) stated that the legitimacy theory has to do with a social contract between corporate bodies and the society where the companies operate. The existence of an agreement between the corporate entity and the society or community in which it carries out its operations is very important for the purposes of legitimacy, peaceful co- existence and for the mutual benefits of both parties. Suddaby et al. (2017) posit that legitimacy theory entails such assurance of meeting the conditions and expectations of the society, while the entity is carrying on its legitimate business. The theory suggests that companies should naturally accept to carry on their operations or activities within the confines of the existing laws without violating the existing peace, rules and regulations as well as environmental and social norms where they do their businesses. The paper employs 13 insurance firms, registered, with published information during 2013 to https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 5 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc 2022. The data are obtained from audited financial reports of selected insurance firms on Nigerian Stock Exchange. The independent variable was Corporate Social Responsibility Disclosure Index. This was rated between disclosure = 1 and non-disclosure = 0 (Shafat, 2018). Also, the dependent variable, effective tax rate which was measured as the income tax expense divided by the earnings (or income earned) before taxes (Greene, 2016). Further, firm size (SIZE) is defined as the natural log of book value of assets. Larger firms are expected to disclose more CSR-related information (Kansal et al., 2014). Claim Settlement is defined as a request filed by the beneficiary of the policy to the insurer to avail death benefit in case of the unfortunate demise of the insured during the policy tenure. The ability of insurers of settle claims lies on her net claim. The larger the net claim the more the ability to indemnify the insureds (customers) who have suffered any loss (Adeloju, et al., 2019). Reinsurance occurred when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit their own total loss in case of disaster. By spreading risk, an insurance company takes on clients whose coverage would be too great of a burden for the single insurance company to handle alone. Claim settlement and reinsurance indicate the insurers’ risk tolerance towards social activities (Falade & Olasupo, 2021). We estimate the model below”. EITRit = α0 + β1COMR1t + β2COMR1t + β3ENVR1t + β2ETHR1t + β5SIZE1t + β6NET1t + β7REN1t + eit (1) “Where, COMR = Community Responsibility, ENVR = Environmental Responsibility, ETHIR = Ethical Responsibility, DIV = Diverse, NET = Net Claim, REN = Reinsurance Profit, et = Error term.  01 = constant term  1-  6 = φt parameters to be estimated. Before the paper assesses the main hypothesis, the study extends the behaviour of the data by presenting the basic deterministic statistics and correlation matrix. Some pre-estimation (multicollinearity, panel effect, cross-section dependence, and Hausman) tests are completed to confirm the stochastic characterization of the stacked panel. The ordinary least square (OLS) regression estimates the panel data based. RESULTS AND DISSCUSION Table 1 shows the basic summary of the considered variables. The minimum and maximum values of effective interest rate during the period of 2013 – 2022 for the sample are 0.000 and 3.84 respectively and with an average rate of 0.165. The variable according to the value deviated with 0.391 from its mean and positively skewed with the rate of 6.905 which showed that EITR has a long right-tail, and the kurtosis is Mesokurtic distribution in nature, simply because the EITR exhibited the rate of 62.46 < 3. Further, the Jarque-Bera of 20031.04 was observed, which implied that the variable had a good fit in the distribution but statically significant as the p-value < the table value (0.0000< 0.05). Community responsibility was also related in the table to have an average value of 0.474 which showed the accumulated average contribution of community responsibility on effective interest rate in Nigeria over the period of 10 years. The Table confirmed that community responsibility exhibited the minimum and maximum value of 0.000 and 0.8200 respectively. The variable deviated with 0.13042 from its mean and positively skewed with the value of 0.019 which implied https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 6 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc that the variable has a long right-tail and the kurtosis was leptokurtic, simply because the variable exhibited the value of 3.426>3.This implied that the variable has a flatter shape with fatter tails resulting in a greater chance of extreme positive effect. The table depicted Jarque-Bera value of 0.984, implied that the variable has a good fit in the distribution but confirmed to be insignificant at 0.611>0.05. An average value of 0.411 was observed for environmental responsibility. The table as well depicted the minimum and maximum value of 0.250 and 0.75000 respectively. The environmental responsibility over the period, according to the table, deviated with 0.165 from its mean value and positively skewed with the value of 0.529. The kurtosis was Mesokurtic, as the value was 2.298<3. The Jarque-Bera test exhibited 8.676 which implied that the variable has a good fit in the distribution and is confirmed significant. The result depicted the data on ethical responsibility with an average value of 0.585 as the accumulated contribution average on effective interest rate over the period of 10 years. It was confirmed that ethical responsibility exhibited the minimum and maximum value of 0.000 and 0.880 respectively. The variable deviated with 0.258 from its mean and negatively skewed with the value of -0.377, which implied that the variable has a short right-tail and the kurtosis was Mesokurtic. The Jarque-Bera value of 11.031 was observed which implied that the variable has a good fit in the distribution and confirmed to be significant at 0.004<0.05. An average value of 0.351 was observed for diversity. The outcome shows the minimum and maximum value of 0.250 and 0.380 respectively. The diversity deviated with 0.054 from its mean value and negatively skewed with the value of -1.318. The kurtosis was Mesokurtic, as the value was 2.738<3. Jarque-Bera test exhibited 37.741 which implied that the variable has a good fit in the distribution and was confirmed perfectly and significant at 0.000<0.05. A record was taken on CSRDI to relate with effective interest rate with an average value of 0.622. The outcome shows CSRDI has a minimum and maximum value of 0.500 and 0.850, respectively, as well as a standard deviation of 0.062 and positively skewed. This implied that the variable has a flatter shape with fatter tails. The Jarque-Bera value of 17.81, implied that the variable has a good fit in the distribution but confirmed to be insignificant at 0.000136<0.05. The insurance firms’ size deviated, with 24572857 from its mean value and positively skewed with the value of 4.324. The kurtosis was leptokurtic, as the value was 26.47>3. However, the Jarque- Bera test exhibited 3363.156 which implied that the variable has a good fit in the distribution and was confirmed significant at 0.000<0.05. The result shows that net claims have an average value of 2290771 the minimum and maximum value of -2599181 and 30776073 respectively. The variable deviated with 4485732 from its mean and positively skewed with the value of 4.241 which implied that the variable has a long right-tail and the kurtosis was leptokurtic, as the value 22.81561>3. The Jarque-Bera value of 2497.332, implied that the variable has a good fit in the distribution. Finally, the industry invested an average value of N1910340 billion in reinsurance, contributing to good risk practices. The minimum and maximum values are -7579125. And N8618365 billion was recorded, respectively. The reinsurance deviated with N2516270 billion but negatively skewed with the value of -0.339553. The kurtosis was leptokurtic, as the value was 5.260484>3. However, the Jarque-Bera test exhibited a value of 29.94399, which implied that the variable fits well in the distribution and was confirmed statistically significant at 0.00000<0.05. https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg https://www.investopedia.com/terms/t/tailrisk.asp https://www.investopedia.com/terms/t/tailrisk.asp Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 7 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Table 2 presents the results for the panel unit root. The test assumes a null of no unit root. At level, the Levin, Lin & Chu (LLC)’t* had a p-value of 0.0000<0.05, Im, Pesaran and Shin (IPS)’ W-stat had 0.0000 <0.05, implying that the variable is stationary at level. Table 3 reports co- integration outcomes. At the 5% level of significance, the result indicates the existence of a co- integrating equation. The hypothesis of no co-integration was accepted at a 5% significance level for the trace statistic and Max Eigenvalue test. This is because 8 of 9 tested parameters revealed values above 0.05. This result indicated that there is no presence of long-term relationship among the variables”. Table 1. Descriptive statistics Min Mean Max Std. Dev. skew Kurt Norma l Variabl e JB P(JB ) EITR 0.000 0.164 3.843 0.391 6.90 4 62.46 20031. 1 0.00 0 COMR 0.000 0.474 0.820 0.130 0.01 9 3.426 0.984 0.61 1 ENVR 0.250 0.411 0.750 0.164 0.52 9 2.297 8.676 0.01 3 ETHR 0.000 0.585 0.880 0.258 - 0.377 1.782 11.031 0.00 4 DIVR 0.250 0.351 0.380 0.054 - 1.318 2.739 37.741 0.00 0 SIZE 0.000 20215121 1.96E+0 8 2457285 7 4.32 4 26.47 1 3363.1 0.00 0 NET -259918 2290771. 1 30776073 4485732 4.24 1 22.81 5 2497.3 0.00 0 REN - 7579125 1910340. 1 8618365 2516270 - 0.340 5.260 29.943 0.00 0 Source: Author Table 2. Panel unit root test Statistic P-value Order Statistic P-value Order Levin, Lin & Chu (LLC) EITR -53.641 0.0000 I(0) -24.9543 0.0000 I(0) COMR -3.0708 0.0011 I(0) -12.8368 0.0000 I(0) ENVR -2.9522 0.0016 I(0) -5.9683 0.0000 I(0) ETHR -4.9280 0.0000 I(0) -18.0118 0.0000 I(0) DIVR -1.5445 0.0612 I(1) -3.1746 0.0008 I(0) SIZE 1.5261 0.9365 I(1) -4.4985 0.0000 I(0) NET 1.4422 0.9254 I(1) 4.72481 1.0000 I(1) REN 0.2387 0.5942 I(1) -5.7395 0.0000 I(0) Im, Pesaran and Shin (IPS) EITR -9.3213 0.0000 I(0) -7.7375 0.0000 I(0) COMR -1.2870 0.0991 I(1) -4.3819 0.0000 I(0) ENVR -1.7529 0.0398 I(0) -2.9171 0.0018 I(0) https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 8 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc ETHR -2.5887 0.0048 I(0) -6.3107 0.0000 I(0) DIVR 0.0734 0.5294 I(1) -1.2492 0.1058 I(1) SIZE 2.8844 0.9980 I(1) -1.5939 0.0555 I(1) NET 0.5765 0.7178 I(1) 1.53992 0.9382 I(1) REN 0.9371 0.8256 I(1) -0.8630 0.1941 I(1) Source: Author (2024) Table 3: Cointegration Test Hypothesized Trace Statistic Maximum Eigenvalue No. of CE(s) EV stat Cv Prob.** EV stat Cv Prob.** None * 0.491 207.56 197.37 0.0141 0.491 60.89 58.43 0.0281 At most 1 0.392 146.67 159.57 0.2012 0.392 44.91 52.36 0.2356 At most 2 0.340 101.75 125.64 0.5459 0.343 37.46 46.23 0.3152 At most 3 0.234 64.29 95.76 0.8803 0.238 24.02 40.07 0.8246 At most 4 0.171 40.26 69.81 0.9435 0.171 16.91 33.87 0.9250 At most 5 0.129 23.35 47.85 0.9551 0.129 12.46 27.58 0.9123 At most 6 0.073 10.88 29.79 0.9639 0.073 6.828 21.13 0.9603 At most 7 0.042 4.056 15.49 0.8990 0.042 3.922 14.26 0.8674 At most 8 0.001 0.133 3.841 0.7151 0.001 0.133 3.841 0.7151 Source: Author (2024) Table 4 shows the outcome of the pre-estimation (Hausman) test for the multivariate panel regression. The test, completed with the null of random effects, confirms whether the model best fits fixed or random effects. The outcome indicates the Chi-Square. (𝜒2) statistic of 7.4408 with Prob > (𝜒2) = 0.3855, is not significant, providing evidence to maintain the null. Hence, the model is best fitted with the random effect. Table 5 shows the outcome of the fixed effect model. The result shows that a unit change in effective interest rate would be about a 4.1% change in community development, -1149% change in firms’ size, -1838% change in the net claim of the insurers, and -531% change in reinsurance profit of the insurers. From the second model, it was also observed that β2 had a coefficient of 0.159, which implied that a unit change in EITR would change environmental responsibility by 15.9%, -1149% change firms’ size, -1838% change in net claim of the insurers, and -531% changes in reinsurance profit of the insurers. β3 had a coefficient of -0.109 (-11.0%), which means that a change in EITR would negatively change environmental responsibility with -11.0%, -1149% change firms’ size, -1838% change in the net claim of the insurers, and -531% changes in reinsurance profit of the insurers. It was also further observed that β4 had a coefficient of - 0.182649, which implied that a unit change in EITR would change insurance diversity by -0.182 (18.3%), change firms’ size, -1838% change in the net claim of the insurers, and -531% changes in reinsurance profit of the insurers. Based on the four hypotheses tested above, the results accepted the four null hypotheses, which stated that community responsibility has no significant relationship with the effective income tax rate of listed insurers in Nigeria; Environmental responsibility has no significant relationship with the effective income tax rate of listed insurers in Nigeria; Ethical responsibility has significant no https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 9 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc relationship with effective income tax rate of listed insurers in Nigeria; Firms’ diversity has no significant relationship with effective income tax rate of listed insurers in Nigeria. These results seemed to align with some of the results of past studies. For example, Gulzar et al. (2018) found that CSR is negatively associated with ETR and Cash ETR, explaining that companies with higher CSR are involved in more tax avoidance when compared to companies with lower CSR. Sari and Tjen (2016) found that corporate social responsibility disclosure reduces tax aggressiveness. This study also provides evidence that the environmental responsibility performance, as measured by the results of the Company Performance Rating Assessment in Environmental Management, can reinforce the reduction in tax aggressiveness caused by the disclosure of social responsibility. Yi and Li (2018) suggested that environmental taxes do not necessarily reduce carbon emissions in the long run, as the outcomes depend on the environmental pollution and the policy mechanism chosen to implement these taxes. Recent studies concluded that carbon taxes and policies have varied impacts in different areas within the same region (Bashir et al., 2021; Dong et al., 2019). Table 4. Hausman test outcome Hausman test: 𝐻0: Random Effect and 𝐻1: Fixed effect Test Statistic Cross-section random, 𝑐ℎ𝑖 − 𝑠𝑞𝑢𝑎𝑟𝑒𝑑 7.4408 (0.3855) Source: Author (2024) Note: The null (𝐻0) assumes the existence of a random effects model. If the test statistic exceeds the relevant critical value, the random effects model is rejected. Alternatively, if the p-value for the test is less than 1%, it indicates that the random effects model is not appropriate and that the fixed effects specification is to be preferred. Table 5: Fixed Effect Estimation for EITRit Variable Coefficient Std. Error t-Statistic Prob. Const. 0.1812 0.3146 0.5758 0.5659 COMR 0.0414 0.3014 0.1375 0.8909 ENVR 0.1594 0.2296 0.6944 0.4889 ETHR -0.1100 0.1552 -0.7085 0.4801 DIVR -0.1826 0.6945 -0.2630 0.7930 SIZE 0.0000 0.0000 -0.0386 0.9693 NET 0.0000 0.0000 -0.4341 0.6651 REN 0.0000 0.0000 1.7417 0.0843 R-squared (Adj) 0.1361 F-statistic 1.0290 Prob(F-statistic) 0.4333 DW 2.0424 Source: Author (2024) https://protect.checkpoint.com/v2/___https:/www.ilomata.org/index.php/ijtc___.YzJlOnVuaXNhbW9iaWxlOmM6bzoyM2NiZDVlMmFkNmE5ZDNjMDNhNWQyM2Y2OGI3ZWVhYjo2OjJmMTU6MThjOTRlZmQ4ZDE5OGViMDIwNWYyOThhMDM1YjIxM2VjYmNjZDQ4NWIxOThmODExZDg2NDZkZWM0YTI2MWY5MzpwOlQ6Tg Impact of Social Responsibility on Income Tax: Empirical Evidence from Nigeria Oyasor 10 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc CONCLUSION The study leveraged the legitimacy theory, which demonstrates the interconnectedness between the company, its stakeholders and society. CSR asserts that corporations should consider the interests of customers, employees, shareholders, host communities, and the ecological footprint in all operations. We verify the relationship between social responsibilities, including community responsibility, environmental responsibility an ethical responsibility, and effective income tax rate of insurance. The findings show that community responsibility has no significant relationship with effective income tax rate. The insurers’ environmental responsibility has no significant relationship with effective income tax rate. Lastly, ethical responsibility has no significant link with effective income tax rate of insurers in Nigeria. The study perceived an adverse predisposition of the insurers to engaging in corporate income tax. The insurers belong more to the empathetic disposition of CSR as they do not see corporate income tax as a demonstration of social responsibility. We found that community, environmental, and ethical responsibility have no connection with the corporate income tax of insurers in Nigeria. The paper offers some recommendations based on this finding. First, to enhance performance and peaceful coexistence with people within its environment, insurers should make more efforts to increase their commitment to community projects, environmental protection and other social responsibility activities. Second, firms should proactively address social responsibility issues to avoid business disruption from host communities. Third, insurance firms are expected to increase their CSR activities in the immediate environment and the surrounding community so that the surrounding community can take advantage of the company's existence. REFERENCES Asian, A. U. & Uche, T. A. (2018). Corporate tax and corporate social responsibility of firms in Nigeria. 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