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Direct Tax and Income Redistribution

Author

Listed:
  • Obehioye Usiomon Akogo

    (University of Benin)

  • Adebukola Adefunke Akadakpo

    (University of Benin)

Abstract

The aim of this paper is to examine the effect of direct tax as a tool for income redistribution in Nigeria. The research design employed in the study is the longitudinal design. The population and sample of this study focused mainly on direct taxes which include; education tax (ED), company’s income tax (CIT), personal income tax (PIT) and petroleum profit tax (PPT), that are domicile in Nigeria. The time frame spanned 1990-2020. Data was sourced from world statistics, central bank statistical bulletin and federal inland revenue service. The data for the study was analysed using the error correction model. Education tax and company income tax had no significant impact in redistributing income, according to the results of the inferential statistic utilized, however petroleum profit tax and personal income tax had a large impact on income redistribution. Furthermore, PIT had a beneficial influence on income redistribution, but petroleum profit tax had a negative effect. The report proposed that a luxury tax system be introduced and well implemented, in which the affluent would be required to pay a tax for consuming more luxury products than the poor. The proceeds from the luxury tax should be utilized to fund free education and medical care for low-income people. Education taxes should be utilized to finance scientific research as well as to sponsor low-income earners in other countries.

Suggested Citation

  • Obehioye Usiomon Akogo & Adebukola Adefunke Akadakpo, 2022. "Direct Tax and Income Redistribution," EuroEconomica, Danubius University of Galati, issue 1(12), pages 33-44, April.
    • Handle: RePEc:dug:journl:y:2022:i:1:p:33-44
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    File URL: https://dj.univ-danubius.ro/index.php/JAM/article/view/1506/2095
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