DIRECT TAXES AND INCOME REDISTRIBUTION IN NIGERIA

Abstract

This study examines direct taxes and income redistribution in Nigeria. The Ex-Post-facto research design was used in the study. The study, which covered a 33-year period from 1990 to 2022, was especially concerned with the Nigerian economy. The study makes use of secondary data that was directly sourced from FIRS annual reports, CBN statistics bulletins, and yearly reports from the National Bureau of Statistics. The research employed the econometric technique of fully modified ordinary least squares (FMOLS) to assess the empirical model and investigate the impact of direct taxes on income redistribution in Nigeria. The data was subjected to time series analysis using the Dickey-Fuller test extension known as Augmented Dickey-Fuller (ADF) to check for stationarity or non-stationarity issues. Subsequently, a cointegration test was employed to determine the cointegration of the non-stationarity variables and to validate the presence of a long-term equilibrium relationship between them. The study's analysis showed that capital gains tax had a little but detrimental impact on Nigeria's redistribution of income. The study also discovered that income redistribution in Nigeria is positively and considerably impacted by the petroleum profit tax, personal income tax, and corporation income tax. According to the study's findings, Nigeria's tax structures should be reviewed. The capital gains tax should be adjusted to ensure that income is redistributed effectively, petroleum profit tax revenue should be optimised for social welfare, company income tax mechanisms should be strengthened to prevent evasion, and personal income tax collection and progressive rates should be improved to align with redistributive goals.