Taxation: half the story of budgets

Taxation: half the story of budgets yet, often ignored

The conceptual framework for a Gender Analysis of Taxation (Barnett and C.Grown, 2004)

1. Gender differences in employment In most countries women’s labour force participation rates are lower than men’s (UN Women 2000) 1. Women’s participation is more discontinuous than is men’s (ILO 2009) 2. Women earn less than men (Tzannatos1999; Artecona and Cunningham 2002; Oostendorp2004;International Labour Organization 2009a). 3. Women work predominately in informal employment The result of women’s employment profile ––they are unlikely to bear a large share of the PIT. However, this may also prevent them from benefits afforded through the tax system.

2. Unpaid care work Vital services, “forms bedrock of human well being and ensures adequate level of productivity of labour force”. (Elson 1995) In every country around the world, women do most of the unpaid care work(Budlender 2002) The issue of whether and how to value unpaid work is a subject of debate as it affects the notion of income and consequently the interpretation of who bears the burden of taxes.

3. Gender differences in expenditure Empirical studies have revealed gender differentials in expenditure (Haddad et al. 1997; Lundberg et al. 1997; Browning and Bonke 2006; Doss 2006). • Women, compared to men, tend to spend a higher proportion of income under their control on goods such as food, education and health care that enhance the well-being and capabilities of children (Thomas Taxation and gender equality 5 1993; Haddad et al. 1997; Quisumbing and Maluccio 2000). Important to analyse how changes in the relative prices of various commodities will affect women’s and men’s expenditure patterns and household welfare.

4. Gender differences in property rights In many countries, women frequently denied the right to own and inherit property. In some countries, tax system are creating incentives to increase female property ownership. • Department of Registration and Stamps, Rajasthan, offers a 50% reduction in the stamp duty for agricultural land, if the land is registered in a woman’s name. • Has reduced the stamp duty from 8% to 5%, in the case of a gift deed of immovable property executed in favour of a sister/daughter/grand daughter/mother or wife. (UNIFEM) • Stotsky(1997) found that family business income is attributed in many countries (e.g., Tanzania) to the husband regardless of the spouse’s role in the business.

From a CEDAW perspective…Different treatment is not necessarily biased treatment • Although there is no specific mention in CEDAW of taxation, it requires that families be based on ‘principles of equity, justice and individual fulfilment for each member’(General Recommendation 21, para. 4). • Article 1, specifies that marital status is not an acceptable basis for any ‘distinctions, exclusions or restrictions’ • Article 5 ‘requires State parties to modify social and cultural patterns of men and women to eliminate practices based on the idea of sex role stereotyping …’ • Therefore, taxation systems should seek to help transform the traditional gendered roles in society that are inequitable.

With this lens now, let us look at some of the taxes

1. Personal Income Tax • What is the proper unit of taxation: individual or household? An individual filing structure is more gender-equitable than joint. Sue Himmelweit (2002) But individual filing systems can create horizontal inequity bwhouseholds: If financially dependent spouses provide unpaid work in male-breadwinner households, this household ‘production’ creates in-kind income which should be factored into total household income (Pechman 1987). • However, if unpaid work should be quantified and included in total household income, the tax burden of low-income households would increase more. • Moreover, as Elson (2006) points out, taxes have to be paid in money, and cannot be paid through unpaid domestic work . • Also what about single women households then? One earner, stay-at-home spouse and children should be compared with one earner, no stay-at-home spouse and children.

b. Impact of PIT on Married Women’s Labour Supply The 1981 US Tax Act reduced the marriage penalty by instituting a secondary-earner deduction. As a result, married women’s participation in the labour market expanded by almost enough to pay for the revenue loss caused by the deduction. (Feenbergand Rosen, 1995) c. Impact of PIT on Fertility A study from the US examined the impact of the personal exemption in the US tax code on fertility. Found that the personal exemption had a positive and significant effect on the national birth rate. (Whittington et al. 1990)

2. Commodity Taxes (VAT, Sales, Excise) South Africa: provided evidence that expenditure on VAT as a proportion of both total taxes paid and annual income is highest for the lowest income household and becomes lower as household income rises. But it zero-rates important commodities that the poor consume. Smith (2000) Vietnam: The effect of VAT in Vietnam on women’s enterprises. Because female-owned enterprises have a different input cost structure than do male-owned enterprises, the VAT places a relatively higher burden on female-owned businesses than male-owned businesses because it increases their total costs and lowers their overall profits. Van Staveren and Akram-Lodhi (2003)

3. Corporate Income Tax Women could benefit in two ways from increased investment that is associated with reductions in corporate taxes. Smith (2000) 1. As shareholders: could presumably benefit from share in the profits resulting from these investments. But does it? In South Africa the majority of shareholders of large companies are men. In India only 17% of working women are self employed in own account; (40% for men. 2. As workers: Women could potentially benefit if corporate tax relief encourages private sector investment that creates employment. However, private sector investment in South Africa has been primarily in capital-intensive industries such as IT, energy and oil, in which employment is dominated by men. But a “Gender Perspective” cannot be bereft of larger politics of progressive economics-- need for greater domestic resources for developmental purposes

4. Tobin Tax • It has been suggested that a portion of the revenues raised by a Tobin tax could be awarded to governments for the design of gender-equitable social insurance and social protection systems. • A Tobin tax would also potentially reduce market volatility – caused by movements in speculative, short-term capital flows – which has disproportionately negative impacts on women (Ça˘gatay, 2003).

5. Trade Tax Three ways in which tariffs affect women: • as workers; • as consumers of imported goods; • as traders in export goods. Kinds of evidence: • The reduction of import tariffs on basic goods such as clothing and food, resulting in lower prices, might be a benefit for poor women, but should we weighed against job losses (Goldman) • Tariff cuts that lead to job losses can lead to a fall in wages in non-protected sectors (Stephanie Seguino) • Trade taxes (as a percentage of trade volume) have a positive effect on current government expenditure. Reductions in import taxes, on the other hand, were associated with decreases in public sector investment in infrastructure and education, which in turn could have negative implications for women’s time allocations and expenditures. (Rao)

6. User Fees Proponents: Need revenue; Reduces wastage esp when resources are scarce Opponents: • Decreases access to basic services • Money recovered is insignificant (The cost recovery levels for health services range from 0.5 per cent in Burkina Faso (1981) and Guinea Bissau (1988) to 9 per cent in Lesotho (1991–92) and Mozambique (1985)) • Transfers costs of providing these services to women and can exacerbate gender discrimination In Kenya, the introduction of user fees (amounting to half a day’s pay for a poor person) in government outpatient health facilities led to a dramatic reduction in utilisation of STD services by both men and women, but the fall was significantly greater for women. Nine months after their introduction, the fees were revoked and women’s utilisation rose to a greater level than the pre-fee levels.

From Advocacy Perspective • MOF • Parliament/state legislatures/local bodies • Finance Commission

Taxation: half the story of budgets