From the Pink Tax to Gender-Based Taxation

By Revanza Almaas, a Directorate General of Taxes officer

"A gender-based tax"

When you hear this, it might come to your mind that this would only lead to gender inequality. Well, it's actually the total opposite. However, before dive into the explanation, let's first take a historical background of this proposal. 

Tax System

In most cases, men are typically seen as the primary earners within households, leading to a common scenario where they tend to have higher incomes and wealth compared to women. This disparity in earnings is also influenced by the availability of paid work opportunities. Research conducted by Gunnarson et al. (2017) examining the European Union context reveals that the proportion of employed women ranges from 46 percent (with the lowest figure in Greece) to 78 percent (the highest in Sweden). Conversely, data from Statistics Indonesia (BPS) for 2021 illustrates that only 35 percent of women are formally employed, with a slightly higher participation rate of 42 percent in the informal sector. In the EU, women typically earn approximately 16 percent less than men, while in Indonesia, this gap widens to around 26 percent. Despite facing greater obstacles in earning potential, women often find themselves in more financially constrained situations.

To compound matters, women also face additional financial burdens related to the so-called "pink tax," which refers to the practice of imposing higher prices on items marketed towards women compared to similar products for men. Personal care items like soap and razors often have significant price discrepancies between genders. If it is true that women's products sold are higher than men's, the pink tax from this buying escalates financial burden faced by women over time.
Moreover, women must also deal with the expenses associated with menstrual hygiene products such as sanitary napkins, underwear, or disposable cups. Some countries impose high taxes on these essential items, commonly referred to as the "tampon tax". Because menstruation is a biological inevitability exclusive to women, they have no choice but to bear these additional costs.

While nominal tax rates are intended to be applied equally to men and women, the tax system unintentionally perpetuates gender inequality due to the differing social and economic characteristic between the genders, like income levels and labor force participation. In order to promote inclusive growth and ensure equitable treatment, governmental tax policies must be made with careful consideration of their impact on gender dynamics. 
Among taxes managed by the central government, income tax and VAT hold the potential as tools for promoting gender equity.
This could involve adjustments to the current tax system, such as providing tax allowances for pregnant women or single mothers, or incentivizing corporations to adopt gender-inclusive practices through tax incentives. We could adjust standard deductions (PTKP) to women giving a birth or are single parents, and exempt certain income from taxation that meets certain criteria.

G20 and OECD

The last time Indonesia spoke about this matter was at the G20 presidency meet in 2022 in Bali. Indonesia proposed that the G20 consider the regulation of gender-based tax mechanism. This topic was also discussed in a forum organized by the OECD.
Reports and study from G20 and OECD reveal that promoting gender equality is an important factor in shaping tax policies across many nations. Many countries have implemented specific tax reforms aimed at enhancing gender fairness, primarily on personal income taxation.
Although explicit bias within tax systems was reported by few countries, over half acknowledged the presence of the risk of bias. These implicit biases, like the explicit ones, can either intensify or reduce existing gender disparities in society.
Most countries do have gender-differentiated data for policy analysis, but this data only revolves around male and female incomes and participation in the labor market. Unfortunately, detailed information regarding consumption, property ownership, and wealth distribution is less readily available and is taken by several countries as a core data gap. Advancing gender equality, in line with the Universal Declaration of Human Rights and the Sustainable Development Goals, stands as a human rights goal for numerous countries, including in G20 and OECD.

Closing

Enhancing gender equity isn't just a matter of fairness. It can also yield economic benefits. Going forward to more inclusive economies where women participate fully is crucial for economic growth.
Ultimately, the adoption of pro-gender equality legislation within tax frameworks shows a step towards more inclusive development and fix financial disparities between genders. This theory may present challenges in alignment with traditional tax principles, like revenue sufficiency and administrative convenience. Yet, addressing these challenges could be facilitated more swiftly if there exists a proactive political will to tackle this issue.

*) This article is the author's personal opinion and does not reflect the attitude of the agency where the author works.

The content on this page may be copied and reused for non-commercial purposes. However, we kindly request users to give credit to the source by providing a link back to the original page. Thank you for your cooperation.