A recent OECD report, based on a July 2021 survey of 43 countries, including from the G20, the OECD and beyond, found few examples of explicit bias (i.e. where tax rules differ by gender). But more than half of the respondent countries saw a risk of implicit bias where gendered differences, for instance, in earnings, work patterns, wealth and/or consumption lead to an unequal outcome when the rules are applied. Such implicit biases are hard to measure (not least because sufficient usable gender-disaggregated data is not always available) and comprehensive analyses are lacking (in particular, ones which look beyond the gender binary).
The OECD report includes a non-exhaustive typology of potential implicit biases that were identified by respondent countries. For example, given differences in capital ownership and income levels, lower tax rates on income from capital (than on, say, employment income) risk a bias in favour men and the level of progressivity of the personal income tax (PIT) system is crucial to the extent and direction of any implicit gender bias – highly progressive tax systems would tend to work in favour of women. A research paper on the position in Ireland cited in the report noted that, pre-COVID, the gender gap in disposable income (i.e. income after tax and benefits) was five percentage points smaller than the gender gap in market income.
So, could and should, the tax system to do more to achieve Sustainable Development Goal #5 (Gender Equality)?
The tax system could definitely be made to do more, in particular through the introduction of explicit bias to promote gender equality. Indeed, the OECD report indicates that, for nine respondent countries, the consideration of such explicit bias is a priority. It could, for instance, be introduced through specific allowances. The OECD report notes, for example, that Argentina introduced higher deductions for the director or trustee fees of women or non-binary directors. This would seem a targeted tool to address the underrepresentation of women and non-binary people at board level.
Whether changes in the tax rules should, more broadly, be used to promote gender equality (and, perhaps, also equality in other respects) is a more difficult question. In an ideal world, my answer might be yes. In a world where our data is imperfect and tax rules are already overly complex, I am not so sure. Perhaps, a more realistic goal would be to ensure that tax rules do not undermine broader policy aims, and countries seem to have been taking action in this respect. For instance, the OECD report indicates that, in order to encourage more equal participation in the labour market, a number of respondent countries moved closer to an individual PIT basis as a household basis tends to have the effect of imposing high marginal rates on secondary earners (who tend to be women) and discouraging their participation in the labour market.
Overall, the key messages that I took away from the OECD report are that more work needs to be done – to analyse the impact of existing (tax) policies on gender equality and develop new initiatives (whether through the tax system or not) – and that, to an encouraging extent, this work has started or is being done. Countries and international organisations are looking to develop solutions and work on gathering the data to ensure that we choose the solutions that work.
The virtual event Breaking the tax bias: Promoting gender equality in taxation on 14 March 2022 is the OECD's formal launch event for the report referred to in this blog and an OECD Taxation Working Paper on Taxation of Part-Time Work in the OECD which will be released on that day.