Gender differences in taxation: Why do they matter?

Closing gender gaps can help set countries on a sustainable path toward more diversified economies, higher levels of productivity, and better prospects for the next generation. Yet gender inequality remains a global problem, especially in low-income countries, where women and girls lag behind men and boys in access to healthcare, education, jobs, entrepreneurship, and access to finance and assets while bearing disproportionate responsibility for unpaid work and care. Gender gaps in labor market participation, entrepreneurship, and land ownership lead to significantly lower productivity, and in turn, lower economic growth .  

Fiscal policy can be a powerful tool to change incentives and correct these market inefficiencies. Public expenditure has long been recognized as an instrument to support education, health, and labor market participation for men and women, but tax systems can also contribute to promoting gender equality in various ways. While women and men are typically taxed under the same rules, the structure and administration of tax systems can have differential impacts on women versus men .

Recent research suggests that tax systems around the world contain both explicit and implicit gender biases. Removing these biases can make tax systems more equitable and contribute to economic growth by increasing female labor force participation and entrepreneurship. For instance, a well-designed progressive income tax can boost the employment of low-income women, especially with the lenient tax treatment of or subsidies for work expenses such as childcare. Gender differences in taxation do matter, and policy makers can take steps to correct them.

In September 2021, the World Bank's Global Tax Program (GTP), with the support of the Government of the United Kingdom, launched a new initiative to explore the gender dimensions of tax policy and reforms. Through this new initiative, the World Bank seeks to help low- and middle-income countries formulate tax policies with a gender lens through analytical work and capacity building for tax and customs administrations. The work in three countries—Ethiopia, India, and Pakistan—illustrates how fiscal policy tools can contribute to gender equality.  

Ethiopia

To assess the tax burdens of poor women and men, a tax and transfer module was included in the 2018/19 Ethiopia Socioeconomic Survey. This dataset also contains intra-household asset ownership by men and women, which when matched with the tax data, enables analysis of different types of taxes on businesses and land ownership. Three ongoing World Bank studies are based on this comprehensive data, which are helping the government understand the impact of various tax policies on male and female households and businesses. One study, for instance, explores the impact of land-use fees and agricultural income taxes. It finds that female-headed- and female adult-only households bear a larger tax burden of these taxes than male-headed- and dual-adult households, which is likely a result of unequal land ownership patterns, gender norms restricting women’s engagement in agriculture, and the gender gap in agricultural productivity. A second study focuses on presumptive taxation, which is a turnover tax on micro and very small firms.  It finds that the presumptive tax is regressive for both male- and female-owned firms. A third study uses the Commitment to Equity (CEQ) methodology to examine gender differences in various taxes and transfers. This study finds that direct taxes are progressive for both men and women, while indirect subsidies (on wheat), excise taxes, and spending on tertiary education are regressive for both. Relative to market income, women gain more from transfers than they lose from taxes, so the net effect is progressive and poverty-reducing.

India

Immovable property such as land and housing can serve as collateral for business loans, bring in rental income, and provide economic security for women to cushion shocks. A new forthcoming World Bank study in India used qualitative techniques to explore whether property tax discounts can incentivize women’s property ownership.     

Through focus groups with male and female taxpayers in six states and cities, and interviews with 20 revenue and land administration officers in eight locations, the study sought to understand the implementation of legal measures that provide concessions for the purchase or transfer of property in women’s name and discounts on recurrent property tax for women-held properties. The study found that discounts on stamp duty have encouraged female property ownership, likely because the amount of the discount is substantial. The impact of the stamp duty is even greater when coupled with non-tax incentives, such as loan concessions for women buying properties in their name.

Pakistan

Two provinces of Pakistan—Khyber Pakhtunkhwa (KP) and Punjab—are examining gender differences in taxpayers’ needs and tax burdens, respectively, to design better tax reforms.

The government in KP plans to roll out one-stop Taxpayer Facilitation Centers (TFC) and digitize tax services so that taxpayers can file and make payments online. The World Bank study will interview 1,000 taxpayers, who will include both men and women taxpayers, to identify the gender differences in their needs, experiences, and constraints in filing and payment. Based on the survey, the study will make recommendations to address gender-specific needs. This study also contributes toward the objectives of the ongoing IDA-funded project, the Khyber Pakhtunkhwa Revenue Mobilization and Public Resource Management Program, which supports the establishment of TFCs and digitization of services. 

The Punjab government has recently enacted a series of laws to increase women’s rights to inheritance and land ownership. A second World Bank study will help assess the gender implications of the Urban Immovable Property Tax by examining how the differences in property types owned by women and men affect their tax burdens and compliance. The study supports the objectives of the ongoing Punjab Resource Improvement and Digital Effectiveness Program.

By supporting these programs and other initiatives, the Global Tax Program is helping countries develop awareness and tools to improve gender equality through their tax systems.  

Special thank you goes to: Hande Ayan, Hitomi Komatsu, Alemayehu Ambel, Tuan Minh Le, Irum Touqeer, Parvina Rakhimova, and Rajul Awasthi who contributed to this blog.