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Income inequality and tax evasion in Nigeria

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  • Barine Michael Nwidobie

Abstract

Studies on the effect of income inequality on tax evasion within and across countries were uniform in concluding that income inequality increases the propensity to evade tax. An empirical examination of this relationship in Nigeria using the augmented Dickey-Fuller, the Johannsen cointegration, the vector error correction model (VECM), and the ordinary least squares on data on the Gini index, income distribution and tax evaded by different income levels in Nigeria from 1985-2018 shows that income inequality in Nigeria positively and significantly influence tax evaded by the top 10% and lower 40% of the income distribution brackets in Nigeria. This necessitates the initiation and implementation of manufacturing, employment, fiscal, monetary, social, human, and educational policies to reduce income inequality with expected positive reduction on tax evasion in Nigeria.

Suggested Citation

  • Barine Michael Nwidobie, 2021. "Income inequality and tax evasion in Nigeria," International Journal of Critical Accounting, Inderscience Enterprises Ltd, vol. 12(3), pages 206-228.
    • Handle: RePEc:ids:ijcrac:v:12:y:2021:i:3:p:206-228
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