Tax and income inequality: evidence from Sub-Saharan Africa

Abstract

PurposeThis study aims to determine how taxes can be used to bridge income inequality gap in sub-Saharan Africa (SSA).Design/methodology/approachA panel data set of 36 SSA countries was analysed using generalised method of moments.FindingsThe results suggest that an increase in direct taxes relative to indirect taxes has a positive significant impact on income inequality. This is mostly due to the progressive nature of direct taxes as compared to indirect taxes.Originality/valueThis research contributes to the scant literature on how specific tax components affect income inequality, especially in developing countries.