The importance of taxation to the economy of every nation cannot be overemphasised. Governments require taxes to augment other revenue sources as well as ensure the provision of public goods. Unfortunately, not every government, especially in developing countries, can achieve optimal tax compliance. In many cases, a significant part of the informal sector is excluded from the tax net , while companies in the formal sector try to minimise tax liability by engaging in different tax planning activities .
It is not surprising for management to seek avenues to reduce tax liabilities. One logical explanation is the desire to maximise shareholders’ wealth even though this affects the revenue capacity of the government [17, 27], which in turn negatively impacts society as it robs it of the availability of public goods. In addition, companies minimise tax liabilities because taxes are outflows from the company’s earnings without any likely immediate benefit. This outflow could have increased the net cash position of firms, which in turn could be used to improve investments, fulfil financial obligations, or paid as dividends to shareholders .
In quantifiable terms,  reports that $9.6 billion is lost annually by the government to tax planning activities in West African countries while $2.9 billion is lost specifically in Nigeria. The 2016 report by the United Nation Conference on Trade and Development (UNCTD) also corroborates the magnitude of revenue lost by developing nations to the tax planning behaviour of Multinational Enterprises. The report specifically documents that $100 billion in aggregate is lost by developing nations . These reports are indicative of the effect of aggressive tax behaviour on revenue generation globally and in Nigeria .
While corporate tax planning cannot be said to be outright illegal, some aggressive tax avoidance practices may be considered as illegal tax schemes depending on the tax laws of a given jurisdiction [35, 49]. For example,  observed that the tax reforms (reduction in corporate tax rate) carried out by the Dutch government in 2006/2007 and the one by the German government in 2007/2008 created an atmosphere where companies were able to engage in tax planning and earnings management. In this case, tax planning by these companies may be difficult to classify as illegal. However, [45, 47] posited that tax aggressiveness may be beneficial in terms of tax savings, but it can equally be detrimental to the firm’s operations since defying tax laws poses reputational and litigation risks which could affect either firm value or the solvency of the company in the long-run. Hence, tax aggressiveness is risky and requires control and monitoring.
The concept of corporate governance equally relates to the issue of tax aggressiveness. It is the totality of means by which organisations are controlled and monitored. The overriding importance is to ensure that shareholders’ interests are safeguarded. Guluma  asserted that the business reason for ensuring sound corporate governance practices is to improve performance and maximise operational and market efficiency by minimising abuse of insider power. However, when it comes to the issue of tax aggressiveness, there are usually multiple conflicts of interest that can lead to abuse of power. One is between management and shareholders while the other is between shareholders and stakeholders. The conflict between management and shareholders is based on the likelihood of rent extraction and opportunistic behaviour of the former [16, 37]. The conflict between shareholders and stakeholders is usually from an ethical/legalistic point of view. Engaging in tax aggressive practices may result in value enhancement for shareholders [15, 22]. However, it also leads to a shortage or reduction in government revenue, which in turn limits the power of the government to meet societal demands and sustainability concerns [12, 55]. Thus, the issue of tax aggressiveness as it relates to governance is double-barrelled and requires putting in place mechanisms to ensure proper monitoring and control. One of such mechanism is the establishment of board sub-committees such as audit committees, risk committees, and sustainability committees that are tasked with different oversight functions.
A good number of corporate financial scandals in the last two decades were attributed to, inter alia, poor corporate governance and the inability of the board to manage risks. This has led to the clamour for standalone committees to effectively monitor and mitigate various dimensions of risks [1, 21, 31]. The corporate governance codes of different countries, including the 2018 Nigerian Code of Corporate Governance [NCCG], require publicly listed companies to establish a risk management framework, in addition to the statutory audit committee and other board committees, to improve their performances . However, opponents question the requirements of the NCCG 2018 that it leads to duplication of roles and functions in the absence of evidence to support the effectiveness of having a standalone risk committee. Therefore, it is pertinent to evaluate the assertion and statutory requirements for a risk committee backed by empirical evidence.
Traditionally, the responsibility for financial oversight and supervision of a firm’s internal control and risk rests on the statutory audit committee [25, 57], however, the various unexpected corporate failures provide a basis to believe that the task of both financial and nonfinancial risk management perhaps has gone beyond the reach and competence of just the audit committee . Abdullah and Shukor , Larasati et al.  posited that tax risk management also relates to a company’s financial risk, thus without an effective audit committee and risk committee, there is the likelihood that management may engage in risky tax avoidance activities that would endanger the reputation of the company. In addition, PricewaterhouseCoopers  argues that while it may be a good idea to delegate risk management to the audit committee, this may not be so effective as proper risk management requires a different kind of expertise that audit committee members may not have. Audit committee members are selected based on financial and accounting related expertise, and they may have little expertise when it comes to the management of risk. Fowokan et al.  posited that the “recent trend of tax litigation cases in both the developed and developing countries is a signal to the fact that organizations’ risk management framework would have to include oversight of compliance with the tax laws and regulations”, and this duty should be assigned to a capable committee. Also,  asserts that a comprehensive framework for managing risk is needed by every organisation that seeks to efficiently deal with the various dimensions of risk such as regulatory, systematic, operational, financial, and strategic risk … just to mention a few. Thus, the issue of risk management cannot be wished away.
A growing number of studies [26, 50, 53, 66] have shown that audit committee effectiveness is associated with a lower propensity for risky tax planning. In addition, the presence of a risk management committee significantly reduces a firm’s financial risks, including engagement in risky tax avoidance schemes [2, 33]. More directly, the study by  showed evidence that the presence of an effective risk committee and audit committee jointly reduce tax aggressiveness. However, the outcomes of these prior studies were based on evidence from developed countries which may not hold when tested within a developing clime like Nigeria.
In Nigeria, companies are required to have committees that may be standalone or combined committees to ensure sufficient oversight of the board. For example, every company is expected to have a statutory audit committee having financial reporting oversight; a nomination and governance committee responsible for nominating and appointing members to the board of directors and oversight of governance matters, respectively; a remuneration committee expected to ensure appropriate remuneration policies, packages and incentives, especially for the managerial cadre; and a risk management committee responsible for oversight matters related to risk . These requirements are relatively new as they are enshrined in the NCCG 2018 which applies to all public companies. However, some argue that having a standalone risk management committee will create overlapping responsibilities between it and audit committees and this may according to the agency theory and resource-based theory, improve monitoring and advisory  but on the other hand, the overlapping may also inhibit the effective functioning of the risk committee as its members may be too busy because of the various commitments in other board committees. Consequently, the relationship between standalone risk committees and strategic outcomes such as firm performance, tax planning, and financial reporting quality may not be clear-cut and thus requires more empirical investigations.
Studies in emerging nations [41,42,43, 62] focused on the impact of corporate governance mechanisms such as the board of directors and firm-level characteristics on tax aggressiveness, but scarcely on the effect of risk committee attributes on tax aggressiveness. The few studies on risk committee [4, 18, 19, 31] have focused on its impact on other aspects such as operational efficiency , firm performance, and cybercrime , thus leaving other areas open for research. For example,  found that risk committee attributes (independence and meetings) had a significant effect on cybercrime within the Nigerian financial sector thus providing evidence that the risk committee is an efficient governance tool to checkmate cyber risk. Similarly,  observed that risk committee size and independence significantly reduced underwriting risk associated with insurance companies in Malaysia. Although these studies report a significant influence of risk committee attributes on organisational outcomes, their focus was on financial companies, and it also excluded tax aggressive behaviour. Consequently, the question of the influence of the risk committee on the level of a firm’s tax aggressiveness in nonfinancial companies is considered a valuable research area worthy of empirical investigation. This study aims to therefore examine the influence of the risk management committee on tax aggressiveness in Nigeria.
This study sampled 80 nonfinancial companies listed on the Nigerian Exchange market from 2008 to 2019 (960 firm-year observations). The censored Tobit estimator was used to evaluate the model for the study, and the finding proves that the presence of a standalone risk committee mitigates aggressive tax practices in Nigeria. This shows that risk committees are not just ceremonial or rubber-stamped committees rather they are substantial committees for sound corporate governance and risk control. For regulatory agencies, this finding provides supporting empirical evidence for the position of the Nigerian Code of Corporate Governance 2018 on the establishment of risk committees. For practitioners, this finding indicates that the risk associated with aggressive tax behaviour can be managed by constituting a standalone risk committee.
The rest of the paper is structured to present both conceptual and empirical reviews in section two. Section three presents the methodology of the study while data analysis and discussion are in the fourth section. The fifth section concludes the paper with recommendations and policy implications.