Tax codes both directly and indirectly harm women through higher tax rates and harsher regulation and monitoring.

Tax and transfers can also affect gender income gaps in the future through affecting employment outcomes and access to education and health today. Direct taxes (their progressivity, the unit of taxation and the definition of the tax base, including child allowances or credits) and transfers tend to affect family and labour supply decisions in an interrelated fashion, determining whether disposable income is sufficient to cover the fixed costs of entering employment (extensive margin), and conditional on employment and how many hours to work (intensive margin) of the second earner, usually women. To the extent that spending on education and health benefits women, investment in their human capital will likely affect job opportunities in the future. Most countries have individual-based PIT with some elements that are family-based, such as tax reliefs or cash transfers designed in complex ways to trade-off equality and work incentives objectives (Christl et al., 2021; Coehlo et al., 2022; Deloitte, 2017; Thomas and O’Reilly, 2016). Individual-based refers to systems where each individual files their own tax return on their earned and unearned income regardless of their marital or cohabiting status; family-based refers to joint filing in couples. In family-based taxation (or joint filing systems) the same tax rates apply to singles and households with multiple adults, but the way thresholds are set to account for the fact that income covers two or more people varies across countries and can affect incentives to work by changing the net returns to employment. This is because the second earner pays tax rates at the higher brackets of the income tax schedule.16 Deductions from taxable income or tax credits or cash transfers based on household composition and income are common. In SSA, 16 out of 54 countries allow deductions for children, and sometimes dependants more generally, including the elderly or spouses (McNabb and Granger, 2022), and this can affect work incentives of adult household members. When the system is combined with means-tested tax credits based on family income, effective marginal tax rates on second earners’ income can become very high (Brewer et al., 2010). The choice over how to design a progressive system of tax and benefits for couples or families that minimises distortions, from a normative point of view, will depend on a range of assumptions and parameters, including household decisions over work (paid and unpaid) of the primary and secondary earner, intrahousehold income sharing rules and social prioritisation of family welfare relative to individual welfare (Bargain, 2008; Kleven et al., 2009). Family-friendly fiscal policies, such as subsidies to childcare services and statutory paid parental leave, may also affect gender gaps in income and labour market outcomes. The arrival of children affects women’s economic welfare and time use more than men’s, and childcare support and paid parental leave can help women combine paid work and motherhood better. Subsidies to childcare services can take many forms, from direct public provision of services to subsidies provided to households (demand-side) or providers (supplyside). Parental leave fiscal policies include the cost to the government of a cash transfer programme for parents (more often mothers) of new-born or adopted children for a certain period so they can take time off work and look after their family.17 These subsidies can redistribute income, but can also affect employment outcomes for women more so than for men. To some degree, they are thought to encourage the redistribution of unpaid care work from mothers to the state and men (UNICEF, 2019). They are likely to influence women’s employment more than men’s not only because they are sometimes targeted specially to mothers – like subsidies to paid maternity leave – but also because female labour supply is more responsive to changes to taxes and benefits (Fabrizio et al., 2020; IMF, 2012). Considering the net effects of taxes and social spending jointly on gender income gaps is key, since individual instruments may serve a multitude of objectives, one of which may (or may not) be redistribution, including across genders. The primary function of tax systems is typically to mobilise revenue to finance public spending. How revenue is raised matters, however, not just for horizontal and vertical income distribution, but also for other policy objectives, including ensuring a conducive environment for business and investment through stable and transparent policy and fair and efficient administration of taxes. Through adjustments to relative prices, taxes can also provide incentives or disincentives for consumption or production that have wider costs or benefits to society (usually addressed through excise taxes). Broadbased consumption taxes are thought to be less progressive but better able to raise public funds efficiently, which can be used to finance social spending that benefits women, including progressive programmes. Social protection systems may also have multiple objectives, including smoothing consumption over a lifetime and reducing poverty. Choices over how to balance social insurance and poverty alleviation will vary across countries, with some having a smaller focus on poverty alleviation, and this will mediate the gendered impact of systems. The fact that women live longer than men on average can perhaps provide some legitimate grounds for differentiation in social security contributions and income from pensions and annuities in a more actuarial-based system, including providing different annual benefits for similar contribution histories (Stotsky, 1997). Several tax and spending instruments are covered in the analysis. On the tax side, the focus of this report is on the following: i) direct taxes (the evidence covers mainly PIT on earned income and some studies on property and land taxes, but some discussion on corporate income tax (CIT) and other wealth taxes is provided); and ii) indirect taxes. Simplified tax schemes for small businesses and other non-tax public fees are also included in the discussion since this issue has been at the centre of debates in LICs. On the spending side, the following categories are covered: i) cash (or direct) transfers, both contributory and noncontributory; ii) indirect subsidies; iii) subsidies to childcare and parental leave; and iv) in-kind transfers on education and health (often the two largest and easiest to allocate in-kind transfers). Investment in infrastructure, including roads, water and sanitation, despite its importance for women’s outcomes and gender inequalities, is beyond the scope of this report. Tax administration practices, including differences between male and female tax officials, may have gendered impacts on effective tax burdens. In the context of tax, this area is capturing more attention from policymakers and researchers (ATAF, 2022; Joshi et al., 2020). An emerging body of descriptive evidence suggests that there are likely gendered impacts of tax enforcement because of gendered differences in tax officials’ behaviour and because different types of activities are subject to varying degrees of monitoring and harassment by tax officials. This is not covered in this report, but it is a fruitful area for further research on the gendered impact of fiscal policies. The issue of how benefit administration may have gendered impacts on the incidence of benefits could also be explored further.