South African women still at a tax disadvantage
FIFI PETERS: On paper, it looks like men and women are taxed the same way, but in reality, a heavier tax burden falls on women, worsening gender income inequality.
To discuss this in more depth and what can be done to level the gender pay gap, I’m joined by Dr. Lee-Ann Steenkamp, Senior Lecturer in Taxation at Stellenbosch Business School. Madam, thank you very much for your time.
I found this study really interesting. In fact, a friend of mine from college brought this to my attention. I would like you to begin by helping us better understand the report. So walk us through the numbers and how women end up paying more taxes than men.
Dr. LEE-ANN STEENKAMP: Good evening, Fifi, and thank you very much for having me.
At first glance, there does not appear to be any explicit gender discrimination. After all, we have a unisex income tax table. That’s what I thought until I started this research a few months ago, and what I realized by doing a gender analysis of tax statistics – which are published annually by the South African Revenue, Sars – is that women continue to cluster in the lower tax brackets.
Over time, although the number of women on the income tax base has increased to around 46%, they contribute only one-third of the income taxes collected. So there is definitely some discrepancy there, which led me to dig a little deeper.
The second thing I realized then is that when you combine this information with the statistics from Stats SA, we see that there is a significant number of households, over 40% in fact, that are headed by women breadwinners. Moreover, women carry a much heavier burden when it comes to raising children, especially single mothers. Thus, 42% of children live only with their single mother against 4% with only their single father. This means that when we combine these statistics, we find that although men and women are taxed equally, the underlying socio-economic conditions mean that women earn less, do much more unpaid care and need to extend their lower incomes. further to care for children, elderly parents and sick family members, for example.
FIFI PETERS: I see that the discrimination extends even to that. Explain how this happens.
Dr. LEE-ANN STEENKAMP: It’s true. What international research shows us is that in most developing countries, low-income women bear the heaviest burden of value added tax, or VAT. Again, this can be attributed to the gender roles that men and women play. Men are still traditionally seen as breadwinners, women as stay-at-home caregivers [and] take care of children.
Thus, women then tend to spend more of their lower incomes on collective household goods – caring for children, paying school fees, taking them to the doctor, etc. Thus, the burden of VAT then falls disproportionately on low-income women compared to men.
We need more gender-disaggregated data to track the drinking habits of men and women in South Africa, but that’s what the aggregate statistics told us.
FIFI PETERS: Just in terms of the wider income tax implications in particular where on paper it looks like we are paying the same but in reality we are not, is this unique to South Africa or is does this happen anywhere else in the world?
Dr. LEE-ANN STEENKAMP: Unfortunately, this is not at all unique to South Africa. This is happening all over the world and not just in developing or emerging economies. There are some interesting examples that I can refer listeners to if they want to download the Women’s Report, which is available for free. If you look at information from the Organization for Economic Co-operation and Development, the OECD, the United Nations and the International Labor Organization, we also see similar trends in many other countries.
Again, this can be attributed to the gender pay gap, which has fortunately narrowed over time. But in South Africa, there is still an average gender pay gap of 16%. It varies from sector to sector. But, more importantly, it is a fact that women’s careers tend to be a third shorter than those of men; women interrupt their careers to raise their children. There are more women in part-time work than men. And all of these underlying factors combined filter into our tax stats and we can certainly see that from the gender-disaggregated information in the Sars stats.
FIFI PETERS: OK. Solutions? You call for affirmative action for women in income tax regulation. What does affirmative action in taxes look like?
Dr. LEE-ANN STEENKAMP: Well, first we need to understand that taxation is part of fiscal policy, and fiscal policy is part of the overall macroeconomic policy of the country. So it’s not as easy as just asking the government to change the tax laws a bit in favor of women. The government has different goals that it must meet to balance inflation with the country’s borrowing and interest rates, etc. But we need to start this conversation, and we definitely need more research on this. I have barely scratched the surface of this research.
Taking a pragmatic approach, I think there are immediate things the Treasury could investigate. For example, adding more items to the VAT law zero-rated list, targeting in particular goods that low-income households, especially single parents, tend to buy, then also considering reintroducing tax relief tax for child care expenses – what we had in the previous tax exemption under apartheid.
In the United States, for example, taxpayers can get a tax refund that reduces your tax liability for certain child care expenses, after-school care, transportation to and from school – which we currently do not have. I think that would go a long way in easing the burden, especially for single parents and even more so for single mothers.
FIFI PETERS: You even suggest interventions such as a higher tax threshold for women, tax breaks for women-owned businesses, and reduced tax rates on women-owned property. You alluded to [it being] part of a larger fiscal policy, so it could be quite complex to implement, but are some of these things done elsewhere? Do we have a practical example that we can use as a best practice?
Dr. LEE-ANN STEENKAMP: Yes, that’s how I made a suggestion. So when I did my review of the literature, looking at what other countries are doing, I identified solutions that I thought might be defensible in South Africa.
I think there is also a good opportunity for the next tax commission, which will hopefully be created in the near future, to be specifically mandated to investigate gender issues in the tax system because, as you say, Fifi, we need to take action – big picture approach to this. I’m not saying that just because you’re a woman you should get tax relief. There should be means testing and [a look at] horizontal and vertical equity in the tax system, so that we can get targeted tax relief where we need it most.
FIFI PETERS: Thank you very much, Dr. Steenkamp. I really thought this was an insightful, economically important conversation – and hope the commission picks up on that and takes your investigation further.
Dr. Lee-Ann Steenkamp is Senior Lecturer in Taxation at Stellenbosch Business School.