IIARD International Institute of Academic Research and Development

Journal of Accounting and Financial Management (JAFM )

E-ISSN 2504-8856
P-ISSN 2695-2211
VOL. 11 NO. 2 2025
DOI: 10.56201/jafm.vol.11.no2.2025.pg86.113

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Effects of Taxes on Income Inequality in Nigeria

Eneisik Gogo Erasmus

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Abstract

This study empirically investigated the effect of taxes on income inequality in Nigeria. To achieve this objective, theoretical, conceptual and empirical literature on taxes and income inequality were extensively reviewed. Taxes were proxied by companies income tax, capital gains tax and value added tax while income inequality is proxied by gini coefficient. Secondary data were obtained from Central Bank of Nigeria statistical bulletin, National Bureau of Statistic and Federal Inland Revenue Service Reports from 1980-2022. The study adopted descriptive statistics for univariate analysis while ordinary least square regression were used to analyze the formulated hypotheses of the study with the aid of Eview 10 econometric statistical software. The findings show that companies income tax had positive and significant effect on gini coefficient. Empirical evidence shows that capital gains tax has positive and significant effect on gini coefficient. Empirical evidence indicates that value added tax had positive and significant effect on gini coefficient. The study concludes that taxes reduced income inequality in Nigeria. The study recommends among others that government should allocate significant portion of companies income tax, capital gains tax and value added tax revenue to invest in quality education, health infrastructure and social welfare programme to reduce income inequality in Nigeria. Government spending should be channeled to rural areas for infrastructural development such as education, health care and agriculture. Government should carryout direct interventions programs such as conditional cash transfer, skill acquisition programs and such programs should be prioritize for vulnerable segments of the society.

keywords:

Taxes, Income Inequality, Nigeria

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