Title: Income inequality and tax evasion in Nigeria

Authors: Barine Michael Nwidobie

Addresses: Department of Accounting and Finance, Caleb University, Lagos, Nigeria

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.

Keywords: economic inequality; Gini index; income inequality; tax evasion; tax havens; Nigeria.

DOI: 10.1504/IJCA.2021.116345

International Journal of Critical Accounting, 2021 Vol.12 No.3, pp.206 - 228

Received: 19 Aug 2020
Accepted: 16 Feb 2021

Published online: 20 Jul 2021 *

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