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Abstract of Impact of Tax Structure on Inequality in Nigeria
This study examined the impact of tax structure on inequality in Nigeria. The objectives of this study were to; assess the impact of value-added tax on inequality in Nigeria; find out the impact of company income tax on inequality in Nigeria; investigate the impact of petroleum profit tax on inequality in Nigeria; and to evaluate the impact of customs and excise duties on inequality in Nigeria. In order to achieve the objective of this study, relevant secondary data were collected from the Central Bank of Nigeria (CBN) and the Federal Inland Revenue Service (FIRS) on VAT, CIT, CED, and PPT for a period of 10years (i.e. 2010 to 2020).
This study contribute to knowledge in sense that, it compliments studies in the area of taxation and income redistribution as compared to most studies, which had used cross country data and also specific studies, which had used aggregated and macroeconomics data, while this study made use of micro simulation data.
The Cointegration and Error Correction Models (ECMs), econometric tests of Breusch-Godfrey Serial Correlation LM, Heteroskedasticity, Ramsey RESET, and Variance inflator factor were used to analyze the data. Augmented Dickey Fuller unit root was used to test for stationarity. The result revealed that value added tax, custom excise duty, and petroleum profit tax had positive relationship with GINI when measured at 5% critical level, though value added tax and custom excise duty were not significant. Company income tax had a negative but significant impact on GINI. Based on the findings, it can be concluded that only company income tax was able to reduce income inequality.
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Therefore this study recommends that value added tax should be imposed on goods and services consumed by high income earners. In respect of custom excise duty, government should address the level of tariffs; for petroleum profit tax, there is need for adequate diversification of the economy; and for company income tax, tax authority should harness corporate taxes to its fullness.
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