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Revenue Mobilization for Gender Equity

11 Sep 2015

  • Author(s): Caren Grown and Sudarshan Gooptu

Revenue Mobilization for Gender Equity
This contribution is published as part of the Think Piece Series The Road To Addis and Beyond, launched to coincide with the third and final drafting session of the outcome document of this summer's Third International Conference on Financing for Development. In this Series, global experts discuss a range of topics complementary to the UNRISD research project on the Politics of Domestic Resource Mobilization on how to fund social development and raise provocative or alternative perspectives that can generate further ideas and debates. Please share your thoughts on this article in the comments space below.

One factor contributing to slow progress in closing gender gaps is insufficient resources to implement promising policy initiatives. Governments mobilize resources for gender equality from multiple sources, including taxes, overseas development assistance (ODA) and through public-private partnerships. This think piece reviews progress in mobilizing revenue for gender equality from these various sources and provides some overarching suggestions for mobilizing more resources and making existing ones more gender equitable.

Caren Grown is Senior Director for Gender at the World Bank Group.
Shan Gooptu is Global Lead on Fiscal Policy in the World Bank Group's Global Practice for Macroeconomics and Fiscal Management.

Introduction


Although there has been progress towards closing gender gaps in key domains (education and health) over the past three decades, achieving full gender equality in social, economic and political life has been elusive. There remains the need to focus more on creating more and better jobs for women and expanding women’s ownership, control over and access to key productive assets such as land, technology, housing, savings and other financial assets. Recently, the global community reaffirmed in the Addis Plan of Action 2015 that achieving gender equality, empowering all women and girls and fully realizing their human rights are essential to achieving sustained, inclusive and equitable economic growth and sustainable development.

One factor contributing to slow progress is insufficient resources to implement promising policy initiatives. Governments mobilize resources for gender equality from multiple sources, including taxes, overseas development assistance (ODA) and through public-private partnerships. This think piece reviews progress in mobilizing revenue for gender equality from these various sources and provides some overarching suggestions for mobilizing more resources and making existing ones more gender equitable.

The right tax policies can foster gender equality


Domestic resources are particularly important for gender equality. First, investing its own resources signals that a country is committed to achieving gender equality—which is key to progress. Second, only domestic resources can ensure longer-term sustainability for those interventions and activities that are needed to create the fundamental transformation in the way that societies conceive of and organize men’s and women’s roles and responsibilities. Among various sources of domestic revenue in developing countries, taxes are the largest source of public finance and raise up to 10 times more revenue than other sources. Higher tax revenue allows governments to spend more on social services and programmes, such as health, education and public transportation, which can promote gender equality and women’s empowerment.

But taxes are not necessarily gender-neutral. Explicit and implicit gender biases in personal income and indirect (value-added and excise) taxes can reinforce existing inequalities and biased social norms through their impact on women’s participation in paid employment and unpaid care work. Explicit gender bias occurs when personal income tax codes or legislation contain specific provisions that treat men and women differently. In Morocco; for instance, the tax system allocates allowances for children to men; female taxpayers can claim the allowances only if they can prove in a court of law that their husband and children are financially dependent on them.1 This reduces men’s tax burden relative to women’s. Implicit biases arising from gendered norms and behaviour are also found in personal income tax systems. For instance, joint filing requirements that tax secondary earner incomes (primarily women’s) at a higher marginal tax rate than men’s income have been found to negatively affect women’s labour supply. Another example of implicit bias is found in South Africa. Because women are under-represented in secure employment with pension benefits, men benefit disproportionately from tax incentives related to pension provision.

Rectifying gender biases in taxation


Reducing explicit and implicit gender biases in personal income taxes can help countries in a number of ways, but most importantly in terms of stimulating employment and improving livelihoods. By expanding the base of the population in paid employment, more people can be drawn into the personal income tax net, thus increasing the tax take.

There are a number of measures countries can take to remove gender biases in personal income taxes. The first one is to eliminate explicit bias in personal income tax codes and legislation, for instance, as South Africa did in 1994. A second measure would be to replace joint filing with individual filing. Countries that have done so (like Ireland) have seen positive impacts on female labour supply. Lowering tax rates, or providing tax relief on female labour income, has also been observed to have a positive net impact on female employment relative to men (for example in India) (Alesino et al. 2010; Grown and Valodia 2010). Third, examining the structure of deductions, exemptions and allowances to ensure they do not contain implicit biases, and introducing deductions for childcare to help redistribute market and unpaid work between male and female spouses can also boost employment. Mexico recently introduced a new law that makes payments for childcare tax-deductible, a reform that is having positive impacts.

Implicit bias is also found in indirect taxes, given differences in male and female consumption expenditure. As a result of gender norms that assign women responsibility for social reproduction, women tend to use larger fractions of their income on basic consumption goods such as food and clothing. Consumption taxes can therefore place a heavier burden on women. However, careful design and implementation of VAT, such as zero-rating for basic consumption goods, can help alleviate this burden. In South Africa, Mexico and the UK, which either zero-rate or have reduced rates on basic necessities in VAT, research that simulated an increase on these items found significant negative impacts on poorer and female-type households (Grown and Valodia 2010).2 This research gives an additional policy impetus for maintaining zero- and reduced rates for the basket of basic consumption goods in value-added taxes.

Personal income and value-added taxes are two key taxes used by all countries. However, in focusing on mobilizing domestic resources, governments consider a range of other direct and indirect taxes, including taxes on dividends and corporate income, and land and property taxes. However, far less is known about the gender impacts of these other instruments.

The need for sex-disaggregated fiscal data


This leads us to call for more granular sex-disaggregated fiscal data. The lack of sex-disaggregated data presents a challenge to uncovering the impacts of different types of taxes and potential tax reforms on males and females. Personal income tax data need to record the sex of the filer, and intra-household data need to be collected on income and expenditure. Such data can be used to assess various types of reforms and their consequences on different types of households and the males and females within them. More and better data can also stimulate empirical work in this area.

Gender-focused aid is on the rise but does not match policy rhetoric on gender equality


Although domestic resources are key to supporting gender-equality interventions in the long term, external resources are still important in the short term to jump-start the allocation of domestic resources for gender-equality interventions in low-income countries.

Recent data from the OECD on gender-focused aid flows suggests that over the period 2002-2013, there has been a threefold increase in DAC members’ aid to gender focused programmes and projects (from $8 billion in 2002 to $28 billion in 2013).3 Since 2008, the annual growth rate of gender-focused aid was 4% per annum compared to overall DAC aid that grew by 1% annually over the same period. The aid that is being directed to promote gender equality in fragile states has been growing even faster (at 10% annually in 2008-2013). This is not necessarily as good as it sounds since fragile states disproportionately lag behind on many key gender indicators.

At the same time, gender-focused aid still accounts for less than 30 percent of total DAC aid (on a commitment basis) with official development assistance overall reaching USD134.8 billion in 2013. The average annual value of donor commitments to promote gender equality and women’s empowerment in 2012-2013 in constant 2012 USD was $25.9 billion (OECD, 2015). This figure disguises the significant disparity in individual OECD DAC member countries' aid commitments to developing countries (see Figures 1 and 2). Most of this gender-focused aid remains concentrated in the education and health sectors. OECD DAC data shows that gender equality focused aid as a share of total aid to economic and productive sectors remained flat in 2008-13. Despite a rise in 2013, this aid accounts for only 2% of aid to the economic and productive sectors. It is particularly low in the energy sector, and in banking and financial services. Given the importance of women’s participation in the labour force and of their ownership and control over productive assets in order to achieve poverty reduction and shared prosperity, it is particularly important that donors help countries to close gender gaps in paid employment and ownership and control of land and housing, and access to finance and technology. Donors should invest in impact evaluations to help generate data on what works in these areas, and in the collection of better data, including flow data (rather than commitment figures), to assess the effectiveness of gender-focused aid.


Figure 1: OECD DAC Members who are providing less than 25% gender equality-focused aid, 2012-13 average (in real terms, 2012 constant USD).



Source: OECD, DAC Creditor Reporting System database, 2015.



Figure 2: OECD DAC Members who are providing more than 50% gender equality-focused aid, 2012-13 average (in real terms, 2012 constant USD).



Source: OECD, DAC Creditor Reporting System database, 2015.


The private sector


The last few decades have witnessed the growth of private sector actors in development assistance to support gender equality, along with a rise in partnerships between public sector agencies and the private sector (PPPs) (Grown 2014). Perhaps more important than their role in development assistance, the private sector plays a critical role in mobilizing resources for gender equality through the creation of jobs and economic opportunities. The private sector is the source of nine out of every 10 jobs in the world, and helps provide access to capital or technology for firms. Small and medium sized enterprises (SMEs) are key drivers of job creation and an avenue for expanding access to productive assets. Yet, one-third or fewer SMEs are owned by females and the credit gap for formal women-owned SMEs is roughly US$ 287.2 billion.4 A number of World Bank and non-Bank initiatives focus on increasing access to finance for female-owned SMEs (see for instance the Global Banking Alliance for Women). In addition, there are a number of new private sector initiatives, led by multi-national corporations, to create more and better jobs for women through entrepreneurship and value chain development.5 While these initiatives are nascent and have not yet been formally evaluated, they hold promise for closing key gender gaps.

Conclusion


In order to mobilize resources from all possible sources (domestic and foreign, from government and the private sector) for achieving gender quality on a sustained basis, reforms are needed on several fronts. This includes revision of tax codes, rates, regulations and tax collection practices to eliminate explicit and implicit gender biases. Such reforms can also encourage more women to join the productive labour force and help redistribute the responsibility of unpaid work and care between men and women. Better data gathering to assess the impact of aid and fiscal policies on gender equality is not only imperative, but also just smart policy.

FOOTNOTES
1 Tax codes in 16 of 173 economies in the World Bank’s Women, Business and the Law database, contain explicit tax deductions or credits granted to men or male heads of households (Benin, Brunei, Darussalam, Burkina, Cambodia, Republic of Congo, Fiji, Guinea, Indonesia, Iraq, Lao PDR, Malaysia, Morocco, Niger, Philippines, Togo, and Tunisia). The codes in Tunisia and Iraq grant women the same tax deductions if they are widowed or divorced.

2 Female type households are defined by the sex composition and earning status of the adult members of the households. In South Africa, introducing a 14 % VAT rate on basic food and paraffin had the largest negative impact on poor and female-type households. In the UK, removing the zero rate on basic food increased incidence disproportionately among poorer female type households and those with no employed adults. In Mexico, a rise in the tax rate from 0 to 15 per cent on basic and non-basic food disproportionately affected poorer households.

3 This data currently covers 92% of all OECD DAC bilateral aid that is screened against the DAC “gender equality policy marker” – a statistical tool used to track aid activities that target gender equality as a policy objective.

4 See International Finance Corporation. 2014. Women-owned SMEs: A Business Opportunity for Financial Institutions. Washington DC: IFC.

5 Among others, two of the more high profile private sector initiatives include ‘10,000 Women’, started by Goldman-Sachs in 2008 and currently working in 43 countries, and the Coca-Cola 5x20 Program, now active in more than 12 countries.


REFERENCES
Alesina, Alberto F. and Ichino, Andrea and Karabarbounis, Loukas. 2010. Gender Based Taxation and the Division of Family Chores. Harvard Institute of Economic Research Discussion Paper No. 2145.

Grown, Caren. 2014. Aid and Gender Equality. UNU-WIDER Position Paper. Helsinki: UNU-WIDER.

Grown, Caren and Imraan Valodia. 2010. Taxation and Gender Equity. London: Routledge.

OECD. 2015. Aid in Support of Gender Equality and Women’s Empowerment – Creditor Reporting System database. March 2015.

World Bank. 2011. World Development Report 2012: Gender Equality and Development. Washington DC: World Bank.

ABOUT THE AUTHORS
    Caren Grown, Senior Director for Gender at the World Bank Group, is recognized internationally as an expert on gender and development. Before joining the Bank Group in 2014, she was Economist-in-Residence and Co-Director of the Program on Gender Analysis in Economics at American University. From 2013-2014, she led the UNU-WIDER program on aid effectiveness and gender equality, and from 2011-2013 she served as Senior Gender Adviser and Acting Senior Coordinator for Gender Equality and Women’s Empowerment at USAID. Among her previous positions, Dr. Grown has been Senior Scholar and Co-Director of the Gender Equality and Economy Program at the Levy Economics Institute at Bard College, Director of the Poverty Reduction and Economic Governance team at the International Center for Research on Women, and Senior Program Officer at the John D. and Catherine T. MacArthur Foundation.

    Shan Gooptu is Global Lead, Fiscal Policy in the World Bank Group's Global Practice for Macroeconomics and Fiscal Management. In this role, Dr. Gooptu is the technical lead of the cross-section of staff in the Practice that have professional interests and abilities in this business line (Global Solutions Group) of the World Bank Group to help deliver strategic, global or country outcomes. He has a Ph.D. in Economics from the University of Illinois, Urbana-Champaign, U.S.A. and over 25 years’ experience in the World Bank where he has undertaken a full range of activities and operational products in both low and middle-income countries--from budget support lending operations to core economic reports, policy and technical papers, and technical assistance services.

Opinions expressed here are those of the authors and do not in any way represent the views of the World Bank Group, its Executive Directors, or the countries that they represent.

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This article reflects the views of the author(s) and does not necessarily represent those of the United Nations Research Institute for Social Development.