On 22 April 2022, as part of the Spring Meetings of the IMF and World Bank, there was a video presentation on gender and taxation by Maria Coelho of the Fiscal Affairs department of the IMF.

The speaker noted that laws that once existed legally linking taxation and gender have mostly gone. However, even where the tax system appears to be neutral it can still have an implicit bias. Taxes can interact with the underlying economic circumstances to reinforce gender inequality.

Income tax

The main example of this is taxation of income from labour. Women are over-represented among lower earners and this can be a problem if the tax system taxes households rather than individuals. The family-based system is a disincentive for women to become involved in the labour market. Where the woman has a partner who is earning more, this is a disincentive for the woman to look for employment, because the income from her labour as a secondary earner would be potentially taxed at a higher marginal rate. Therefore in a system where there is taxation of the household there should also be an option for the members of the household to be taxed as individuals.

Where taxation relates to households rather than people the combined income of the family can take them into higher rates of tax, whereas taxation as individuals would likely tax them at lower rates. The fair method of taxation from a gender point of view is to tax each member of the household as an individual, so low earners will be taxed at the lowest rates. There is generally a shortfall of women participating in the labour market, but this shortfall is not so great in countries that tax individuals rather than households.

Capital income taxes

For capital income taxes, there are few women in the top income bands. As the taxes on capital income are typically lower than tax on income from labour, this can in effect represent discrimination against women.

Wealth and inheritance taxes

There can be a similar effect with wealth and inheritance taxes, which are often not progressive. The gender wealth gap is substantial, and these taxes if they are not progressive are benefiting the people with the highest wealth, which are mainly men.

The speaker noted that countries that have strong inheritance or property rights for women also earn higher revenue from these taxes and the revenue from the taxes represents a higher share of GDP.

Indirect taxes

In the case of special consumption taxes, there can be discrimination. Tobacco tax is normally charged at low rates in countries where the majority of smokers are men.

Value added tax (VAT) often has a reduced rate for items such as hygiene products for women. Lower rates are not however the most effective solution because they benefit women with high incomes as well as those with lower incomes. The most efficient way would be to tax all products at the same rate of VAT and to make the relevant products available free of charge to women on low incomes. This would be funded by the VAT paid by people on higher incomes.