Current Tax Matters: Dr. JEYAPALAN KASIPILLAI
During the last two to three decades, most tax jurisdictions worldwide have reformed their tax systems to reduce gender bias. Gender bias in a tax system occurs when men and women are treated differently in ways that can adversely affect their decisions on how much to work, their personal consumption habits and their overall tax liability.
For instance, when female spouses do not have an option to file a tax return on their own, gender bias is said to exist.
In Malaysia, prior to 1974, the income of a wife was aggregated with her husband’s and taxed at the marginal progressive tax rate.
Gender bias can also occur when the wife’s unearned income, such as rent, dividends and interest receipts were taxed on the husband, as in the case of Thailand.
Gender bias is easily perceivable in personal income tax arrangements. However, it may be explicit in other taxes, such as consumption taxes and import duties.
For example, consumption taxes have important gender implications given that women and men are likely to consume different goods and services, and also based on the way in which household income and expenditure is managed and distributed.
The 2007 Hong Kong Budget announcement reduced by half the duty on wine, beer and other drinks containing not more that 30% of alcohol, benefiting the females more than the males. The lowering of these duties would cost the Hong Kong Revenue Department over US$350mil a year. Due to changing social attitudes, numerous countries in recent decades have reformed their tax systems to reduce gender bias.
In most advanced countries, the personal income tax system based on joint filing by members of the same family unit has given rise to deliberations on how tax authorities treat income of secondary earners (women in most cases) and the impact tax incentives have on their work pattern, child bearing and other behaviour.
Developing countries as a group have generally been slower to implement reform when compared to industrialised countries, but some have now begun to change their tax systems to address this bias.
As in advanced countries, these efforts have generally focused on personal income tax. However, in examining the gender issues in tax systems, it should not be forgotten that a certain amount of bias may be acceptable in some societies because the social arrangements of that country requires it.
In a few countries, the nature of exemptions and personal relief that taxpayers may claim varies according to whether the taxpayer is male or female. For example, until 1990, British Income Tax provided for the husband to file the joint tax return. Similar arrangements applied in France until 1983.
Treating the family as a tax unit may discourage women from seeking employment. Under a joint assessment system, the earnings of the secondary earner, usually the wife, are taxed at higher marginal rates, thus creating a disincentive for her to work.
A system of joint tax filing with a progressive marginal rate schedule discourages secondary workers, particularly when the tax on their income starts at the highest marginal tax rate of the chargeable income.
This so-called “marriage tax” under a system of joint filing has been typically viewed as discriminating against women, although it would of course, apply equally to a husband if he were the secondary worker.
Separate taxation increases women’s incentive to work, can indirectly result in greater participation by the husband in domestic activities and a smaller share of household responsibilities for the wife, thereby eventually increasing women’s relative earnings.
Gender discrimination also appears in the tax systems of other developing countries. Before 1994, the South African tax system used varying rate schedules for married persons and single persons. These rates were unified in 1995. Some developing countries explicitly discriminate in favour of women. For example, Singapore’s tax system is unique in the nature of explicit gender differentiation as it builds child relief into the income tax.
A basic child relief is available to a taxpayer. In addition, a married woman is entitled to additional allowances for children if she elects to be charged tax in her own name. This provision is to encourage well-educated women to have more children.
