New perspectives: Impact of tax policy on gender equality

BY LEARNMORE NYAMUDZANGA In Zimbabwe there are more women than men, women constitute an estimated 52% to 54% of the population and it is a fact that they are heavily dependent on public services such as health, water and sanitation.

Nearly 87% of the 2022 budget is funded by tax revenue, therefore the above crucial services are primarily funded by taxes.

In such a context, what are the impacts of taxation on men and women, particularly how both formal and informal tax systems impact the livelihoods of poorer Zimbabweans especially women?

In my previous article on Critical analysis of ZIMRA’s performance, I encouraged the taxing authority to go beyond tax collections (revenue) targets, otherwise they will miss a lot of important issues in their quarterly reports.

One of the issues I raised was the need to do a gender-disaggregated tax incidence analysis.

In this analysis the Ministry of Finance and the taxing authority must look at the impact of the overall tax system on women and men.

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They must look at fairness or unfairness of progressive and regressive (direct and indirect) taxes on Zimbabwean citizens.

As alluded to in my previous articles  from an economic justice and human rights perspective, taxes paid by citizens are crucial for four major reasons (4Rs) briefly explained as follows:

Revenue: taxes raise funds to deliver the services citizens need. The current road construction is being funded by taxes paid by citizens as such credit should go to compliant taxpayers. In addition, taxes enable the government to raise revenue to provide health, education, water and sanitation facilities and other public services such as police and army.

Redistribution: taxes help to reduce poverty; inequality and spread the benefits of development more widely. Income taxes are usually progressive they reduce the gap between the rich and the poor; however, indirect taxes like value-added tax (VAT) and IMTT (2% tax) are generally regressive; they widen the gap between the rich and the poor. That is why some institutions are calling for wealth taxes.

Representation: taxes helps in building accountability of government to citizens and reclaiming policy space. Taxation strengthens and protects channels of political representation: when citizens are taxed, they demand representation in return from their ruler. When citizens pay their tax dues, they are entering into a social contract with the government to get in return quality public services. If you are tax compliant all things being equal, you have the right to demand quality services from the government.

Repricing: taxes limit public ‘bads’; encouraging public ‘goods’. Taxes (and subsidies) can be used to change behaviour, for example taxing tobacco, pollution or carbon-based energy is accepted by many people as a way to curb potentially harmful activities.

In this article, I am going to focus on tax and gender related issues, giving more attention to redistribution as one of the functions of tax.

Does our tax system treat every Zimbabwean in the same manner? Fairness is one of Zimra’s values, does the authority walk the talk?

Do we see fairness in our current tax system?

Interestingly, according to section 298, subsection 2 of the Public Financial Management Act, the burden of taxation must be shared fairly.

However, expenditure must be directed towards the development of Zimbabwe, and special provision must be made for marginalized groups (such as women) and areas.

In addition, the current taxing Acts or tools that are used by Zimra treat men and women equally.

Tax laws do not separate men from women, instead they talk about taxpayers, meaning to say literally it does treat men and women equally.

If that is the case, then why do we need a gender-disaggregated tax incidence analysis?

According to a 2019 research by Waziona Ligomeka in Zimbabwe, most flea markets are operated by women and tax compliant flea market traders pay a higher proportion of their income in taxes than formal traders.

The study also concluded that taxes paid by flea market traders are highly regressive since they do not consider the level of income of the taxpayers.

If the findings of this study are true, then policymakers must take this into consideration if they are to come up with a gender sensitive tax policy or system.

Let’s go beyond our borders.

In 2018 a study in the Uganda Revenue Authority found that female staff on average perform slightly better than men, female employees on average serve the organisation for slightly longer than men, and the rate of disciplinary actions against male employees is more than twice than that against female employees.

It was, therefore, suggested that large-scale recruitment of women into tax administration probably improves organisational performance.

I guess Zimra is in a better position to tell us the situation in Zimbabwe.

Furthermore, in 2018 again, a study in Tanzania to examine market taxation in Dar es Salaam from a gender perspective, did not find evidence of gender bias in the way market traders are taxed, but it found that women were paying more toilet fees than men.

This suggested a major adverse impact on women traders, who by nature require toilets more frequently than men, and have fewer alternatives.

Another 2018 study in Sierra Leone, which investigated the gendered differences in the payment of formal and informal taxes, found that focus on formal tax systems is insufficient for revealing the gender-differentiated patterns of use and funding of collective goods and services.

The study found that although male-headed households are more likely to pay formal user fees (like school fees, health clinic fees, and burial and marriage fees), they pay a smaller amount than women in relation to their income.

At the same time, female-headed households pay more informal taxes and user fees like payments made to non-state actors such as chiefs and community development associations and informal payments to doctors and teachers.

In addition, in 2020 a study done in Ethiopia to investigate the correlation between business owner’s gender and tax compliance found out that enterprises’ tax compliance behaviour is significantly affected by their owners’ gender.

Women were more compliant than men especially as business grew.

It was concluded that development-related policies should consider the behavioural variation among male and female business owners and promote women participation.

Even beyond our continent, most countries focus on spending, but tax policies are not always gender neutral.

For example, Austria and some governments including Finland, Ireland, and Spain took or committed to undertake studies looking at the gender aspects of revenue policy.

In concluding,  the Ministry of Finance and Zimra must do a gender-disaggregated tax-incidence analysis, looking at the gender aspects of tax system and revenue policy.

Going forward tax-incidence analysis should be the norm before introducing any new tax policy.

The Ministry of Finance and Zimra must consider findings and recommendations in the above studies.

They can work with organisations like International Centre for Tax and Development (ICTD) which have a research arm on gender and tax particularly in Africa. The research arm focuses on:

• representation of women in African tax administrations, and the impacts of their participation on tax collection and revenue authority performance
• investigating the differing impacts of taxation on men and women, and particularly how both formal and informal tax systems impact on the livelihoods of poorer African women.

In addition, I encourage researchers, especially women, to join the African Tax Administration (ATAF)’s Women in Tax Network, a network that represents and connects the women of Africa working in taxation with the aim of furthering discussion on the effect of tax policy on gender equality and empowering women in tax.

• Nyamudzanga is an economist, researcher and tax consultant who is a ZES member with Master’s in Tax Policy and Tax Administration and Degree in Economics. Email: lnyamudzanga@gmail.com.
• *These weekly articles are coordinated by Lovemore Kadenge, independent consultant, past president of the Zimbabwe Economic Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe. — kadenge.zes@gmail.com or mobile +263 772 382 852.