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Direct Taxes and Income Redistribution in Nigeria

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  • EDO Onome Christopher

    (Auburn University at Montgomery, Montgomery, Alabama Author-2-Name: EDO Onome Christopher Author-2-Workplace-Name: Department of Information Systems, College of Business, Auburn University at Montgomery, Montgomery, Alabama. Author-3-Name: AKHIGBODEMHE Emmanuel Justice Author-3-Workplace-Name: Department of Economics, Faculty of Social Sciences, University of Benin, Edo- State- Nigeria. Author-4-Name: EDEOGHON Innocent Osaremen Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

Introduction - Income redistribution is central to the development of any nation. However, the issue of generating income and its redistribution in Nigeria has been challenging overtime, with the nation depending largely on oil with little consideration on other sources of income. Also, insufficient tax resources, tax collectors' illicit activities and a lack of awareness of the value of paying tax by taxpayers are some of the problems facing the country in terms of tax revenue generation. Objective - Our study therefore investigated the impact of direct taxes on income redistribution in the context of Nigeria, using company income tax, personal income tax, petroleum profit tax and education tax as direct tax variables. Methodology/Technique - The study covered the period 1990 to 2019 using annualized data set from Federal Inland Revenue Service (FIRS) and Central Bank of Nigeria Statistical Bulletin. The study employed the Fully Modified Least Squares (FMOLS) to analyze the data. Research Findings - Empirical results of our study revealed that, company income tax and education tax had insignificant negative effects on income redistribution, while personal income tax and petroleum profit tax had significant positive effects on income redistribution, thus reducing income inequality in the context of Nigeria. Recommendations - We thus recommended "inter alia" that, revenue generated from taxes should be effectively used by government in providing quality infrastructures like schools, railway, healthcare facilities and other business outfits across various states for the general wellbeing of the citizens as this is hoped to close the income distribution gap between the rich and the less privileged in the country. Type of Paper - Empirical.

Suggested Citation

  • EDO Onome Christopher, 2021. "Direct Taxes and Income Redistribution in Nigeria," GATR Journals gjbssr596, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:gjbssr596
    DOI: https://doi.org/10.35609/gjbssr.2021.9.2(8)
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    References listed on IDEAS

    as
    1. Nora Lustig, 2017. "Fiscal Policy, Income Redistribution and Poverty Reduction in Low and Middle Income Countries," Commitment to Equity (CEQ) Working Paper Series 54, Tulane University, Department of Economics.
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    More about this item

    Keywords

    Income redistribution; direct taxes; government expenditure on infrastructural goods; Fully Modified Least Squares (FMOLS); Nigeria; Income Inequality.;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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