Addressing global taxation and gender equality

The increased call on countries to maximise local revenue in order to finance their own development agenda adds to the urgency of  making sure that domestic resources are tailored towards achieving gender equality.

Patita Tingoi
15 July 2015

The third Financing for Development conference currently underway in Addis Ababa, Ethiopia, provides a historic opportunity to insist on financing that is gender-responsive and fit to deliver on both long-established and newly won commitments on women’s rights. In order to deliver on the ambitious agenda for achieving gender equality and women’s rights, pledges and commitments must be matched by resource allocation. At same time the structural, systemic global policy and power imbalances and incoherencies that exist need to be overcome.

The increased call and emphasis on countries to maximise local revenue in order to finance their own development agenda is of critical importance, and adds to the urgency of working to make sure that domestic resources are  tailored towards achieving gender equality and must be responsive to women’s needs and priorities.

There are major concerns by women’s lobby groups that tax systems are biased against women, and that contemporary tax reforms may increase the incidence of taxation on the poorest women while failing to generate enough revenue to finance the fulfillment of human rights, including women’s rights. This is evident in the decrease of taxes paid by corporations globally through tax evasion and exemptions, and the increase in value added tax on basic commodities.

Governments have not paid sufficient attention to how tax policies and tax reforms may interact with gendered social norms. Governments, especially those in developing nations where people are in dire need of social services,  have failed to prioritise the most crucial public investments such as water, education and healthcare, and have instead prioritized investment on extractive industry projects - as documented by Magdalena Sepúlveda Carmona, the UN Special Rapporteur on extreme poverty and human rights, in her report on human rights impact of fiscal and tax policy based on country studies. This kind of social engineering prioritises the needs of capital markets over the welfare of citizens.

Illicit financial flows

Illicit financial flows rob governments of resources, reducing capital which translates in to lost opportunities for advancing economic and human development for women and vulnerable groups in developing countries. A report by the Mbeki Panel on illicit flows  states: “Over the last 50 years, Africa is estimated to have lost in excess of $1 trillion in illicit financial flows. This sum is roughly equivalent to all of the official development assistance received by Africa during the same timeframe. 2 Currently, Africa is estimated to be losing more than $50 billion annually in IFFs.”

Although there is a call to increase the amount of Official Development Assistance” (ODA) from 0.7 % in the financing for development negotiations, these should be advocated for hand in hand with calls to block the loopholes allowing the outflow of financial resources from developing countries if they are to make any headway in mobilising the needed domestic resources for development.

A report by Christian Aid, Death and taxes: the true toll of tax dodging, found that while 60 billion dollars a year was required to finance Millennium Development Goals in Africa, the amount lost through illicit financial flows was three times more.  A further report by ActionAid UK, Accounting for poverty: how international tax rules keep people poor, calls for a change in international tax rules to make it easier for poor countries to detect and clamp down on tax dodging. 

Taxation and gender equality

Research conducted on the relation between Taxation and Gender Equality shows that across low-income countries, about two-thirds of tax revenue is raised through indirect taxes. In contrast, across high-income countries, indirect taxes account for only about one-third of tax revenue, with the remaining two-thirds coming from direct taxes. In low-income countries, personal income tax accounts for just over a quarter of tax revenue, while in high-income countries, it accounts for over a third of tax revenue. This means that developing counties raise more revenue from taxing consumption than taxing income and wealth. This affects women in two ways. First, research has shown that spending habits of women especially those in poor parts of the world are made on procuring basic needs for their families. Commodity taxing in the form of VAT and other indirect taxes increases the cost of these very basic products like cooking oil, sanitary towels, maize, flour, etc making essential items more expensive for women. The failure to tax the wealthy through corporate tax for example means that governments collect less revenue and tend  to cut expenditure related to social services. Targeting consumption to raise taxes instead of corporate tax is a classic case of increased taxation on the poorest women, and there is a critical need to develop international mechanisms that prevent corporate tax exemptions as well as ensuring that corporations pay their fair share of taxes. To this end, there is a push by many scholars, civil society organizations and women’s organisations under the Women Working Group for Financing for Development (WWG on FfD) as well as developing nations to have “an intergovernmental tax body with universal membership under the UN that will ensure a democratic discussion and decision-making about tax issues not only […]to reduce tax competition but also to contribute to the expansion of developing countries’ fiscal space” as the latest WWG on Ffd recommendations demands. 

Whereas on the national level, equitable and progressive tax systems are critical to the achievement of adequate domestic resources to advance women’s rights - including access to adequate public services, at the international level corporate transparency there must be a binding obligation to ensure the corporate sector is held accountable for negative impacts of their taxation policies, illicit financial flows and tax evasion. The on-going UN Financing for Development negotiations taking place in Addis Ababa this week should recommend implementation of a ‘country by country reporting’ obligation for multinational corporations to publicly disclose their profits as part of their annual reports for each country in which they operate. To facilitate this, a global intergovernmental tax body for automatic exchange of information on tax should be established, and the developed nations under the Organisation for Economic Cooperation and Development (OECD) umbrella must lead from the front in pushing for its establishment. Such a system must be designed in a way that allows meaningful participation from all stakeholders, who should be allowed to receive information automatically even though they might not yet have the capacity to send the same information back.


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