Abstract
The contribution of personal income tax to gross national income is assessed in this study. Over the years, tax revenue has been an important government source of income to finance public goods and services. In Nigeria, the tax structure includes personal income tax (PIT) as well as other direct and indirect taxes. There is PIT collection by both the state and federal governments. This study examines the influence of PIT on aggregate income of the country from 2011 to 2020 using ordinary least squares method. The dependent variable is the gross national earnings while the independent variable is the personal income tax collected at the federal government level in Nigeria. The study finds corruption and inflation as two useful control variables that have direct influence and link with individuals' tax compliance in Nigeria. The data sources include the Organization for Economic Co-operation and Development (OECD) for PIT figures, Transparency International (TI) for Corruption Perceptions Index (CPI) data and World Bank Economic Indicators for Gross National Income (GNI) and inflation statistics. The empirical findings reveal that PIT has a significant positive influence on the gross national income. The moderating variables applied are not significant and could not explain the vicissitudes in the gross national earnings. The study recommends improvement in the PIT administration to boost tax revenue collections and remittances to the government treasury. Further suggestion by this study is that corruption and inflation should be minimized to enhance PIT collection at both federal and state government levels.
Highlights
Tax income is seen as a key and powerful tool for boosting a country's economic growth
The findings showed that income tax and commodity – service tax had negative effects while property and capital transaction tax exerted significant positive effect on the state economic growth
The study examines the influence of personal income tax on gross national income of Nigeria for a decade which span from 2011 to 2020
Summary
Tax income is seen as a key and powerful tool for boosting a country's economic growth. Taxable income is the basis for the income tax system levies and determines the amount of tax a person must pay in a certain calendar year It comprises part or all revenue less costs and other deductions. Former President Goodluck Jonathan signed into law a revised PIT Act during his administration to replace the contentious portions, Section 33 of the Personal Income Tax Act 1993, which deals with: Personal Relief, Relief for Children, Relief for Dependent Relatives, and so on. They have been replaced with a Consolidated Relief Allowance (CRA) of N200,000 plus 20% of Gross Income (G.I). The rest of the other variables are employed for moderation purposes
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