45 © 2017 AESS Publications. All Rights Reserved. PERSONAL INCOME TAX AND GOVERNMENT REVENUE: EVIDENCE FROM OYO STATE Adegbite, Tajudeen Adejare 1 1 Department of Management and Accounting, Ladoke Akintola University of Technology, Ogbomoso, Oyo State, Nigeria ABSTRACT Article History Received: 5 May 2017 Revised: 8 June 2017 Accepted: 27 June 2017 Published: 20 July 2017 Keywords Personal income tax Effects PAYE Road tax Oyo state. Capital gain tax The study examined the effect of Personal income tax on revenue generation in Oyo state. It also analyzed the significant components of Personal income tax on revenue generation in Oyo state. Data were obtained from approved budgets of the Oyo State government from 1990 to 2015. Pearson product moment correlation and multiple regressions were employed to analyze the relationship between the dependent variable (Revenue Generation in Oyo State) and independent variables (Pay As You Earn(PAYE), Capital Gain Tax, Road Tax, and Other Taxes ( Stamp duties, Betting and Gaming Taxes, Business Premises and registration levies, Development levies and Market fees)). Findings show that there is a positive significant effect of Pay As You Earn (PAYE) on Government Revenue in Oyo state (β = .1393567; p ≤ 0.05). All other variables have positive significant effect on Government Revenue in Oyo state with the exception of Capital gain tax which has negative effect on Government Revenue in Oyo state with the adjusted R2 @ 96.4%. In conclusion, Personal income tax impacted Government Revenue positively, strongly, significantly and statistically in Oyo State. It is now recommended that Oyo state government should look inward on how more internal revenue will be generated extensively in the state in order to achieve micro objectives of the government, and to eradicate the paucity of government revenue. Contribution/Originality: This study contributes in existing literature by establishing the effect of personal income tax, capital gain tax, and other taxes on internally generated revenue in Oyo state which has not been examined and analysed by the existing researchers. It also originates new model on the effect of personal income tax on internally generated revenue in Oyo state which will serve as a reference for the future researchers 1. INTRODUCTION Sanni (2005) advocate the use of tax as an instrument of social engineering, to stimulate general and/or sectoral economic growth. In that regard, taxation could have a positive or negative effect on both the individual and on government. To the individual, low income tax rate constitutes an incentive to work or save, while high income tax rate represents a disincentive to work or save. To the government, high tax rates provides the most reliable, important and dominant source of government revenue, for promoting the economic development of the nation. The tax rate is often a major consideration in the choice of organizational form of business (Okafor, 2012) and may also be associated with varying levels of foreign direct investment (Desai et al., 2004). According to International Journal of Social and Administrative Sciences ISSN(e): 2521-0556 DOI: 10.18488/journal.136.2017.22.45.51 Vol. 2, No. 2, 45-51. © 2017 AESS Publications. All Rights Reserved. URL: www.aessweb.com