Gender Equality Impact Assessment of Taxes

1. Gender Equality Impact Assessment of Taxes Diane Elson, Emeritus Professor, University of Essex, Chair of UK Women’s Budget Group Talk at Glasgow Caledonian University 29 May 2013 For more information on UK WBG, see wbg.org.uk

2. Gender Equality Impact Assessment: Some General Themes • Is the government conducting gender equality impact assessment (GEIA)? • If not, is lack of data the excuse? • If so, what kind of assessment is it carrying out? Is it adequate? • If so, does the impact assessment make any difference to policy? • Are women’s organizations concerned about gender equality impact assessment ? • If so, how are they engaging with this issue? • What is the institutional, political and economic context? • How does practice of UK government compare with practice of Scottish government? • Focus on tax measures, as Scotland Act 2012 provides for new taxing powers

3. GEIA of tax measures in March 2013 budget • Gender analysis of the impact of tax measures can be found on the HM Revenue and Customs website in Annex A of Overview of Tax Legislation and Rates. See http://www.hmrc.gov.uk/budget2013/ootlar-main.pdf • The GEIA is included alongside analysis of other equalities impacts and : • Exchequer impact ( i.e. revenue raised or forgone) • Economic impact (i.e. on macroeconomic variables) • Impact on households and individuals (i.e gain or loss of disposable income) • Impact on business and civil society organizations (i.e. compliance costs) • Operational impact (i.e cost of administering the measure) • Other impacts • GEIA is not provided for taxes on corporations • No consistent method used for GEIA and quality often poor • Document is not signaled on Treasury website and is hard to find.

4. Struggle to Secure GEIA of UK Budget • Budget documents for June 2010 budget did NOT include an equalities impact assessment • Fawcett Society as part of wider campaign against the cuts, mounts a legal challenge in August 2010, asking for a judicial review of budget, comes to court December 2010 • Defence case argued by Government: • admitted should have undertaken a GEIA for two major policies ( public sector pay freeze and indexation of benefits for CPI not RPI) and expressed regret at omission • argued that GEIASs for most measures were responsibility of spending departments and could be done after the budget • argued that it was not possible to produce a GEIA of cumulative impact of budget as a whole • Judicial decision: • permission for judicial review not granted , confirmed that budgets are covered by Equality law • found that assessment by Equalities and Human Rights Commission provides an alternative means to examine actions of the Treasury • found that there is a need for improved data collection on the impact of taxation and spending policies on women and men

5. Introduction of GEIA by HMRC • Budgets 2011, 2012 and 2013 did include GEIA of tax measures, on website of HM Revenue and Customs • Similar problems of lack of transparency , incompleteness , inconsistency and poor quality • Taxes on corporations excluded • No cumulative impact analysis for combination of tax, tax credit and benefit measures • Cumulative impact analysis only done for households by decile ( from poorest 10 %to richest 10%), on Treasury website

6. Examples of GEIA of tax measures in UK Budget 2011 Example 1 : a tax break for business investment Assessment notes that this goes to investors that tend to be ‘male, located in the South of England and have higher overall income levels.’ • ‘ The changes to the scheme are not likely to change that position. We have no data to suggest that there will be impacts on other groups. From the data available therefore we do not think these changes will have a disproportionate impact.’ • No recognition of significance that this tax break benefits an already privileged group and that it reduces revenue available for mitigating measures Example: 2 fuel duty • The equalities impact assessment for the reduction in fuel duty ( costing £1,900 m in 2011/12) says: • “Motorists who drive the same car and drive the same number of miles should broadly be affected by the same amount.” • does not take into account differences in the car use of different social groups

7. GEIA of fuel duty reduction by UK WBG • Uses gendered household characteristics approach • Initially developed for multi-country project on taxation and gender involving some UK WBG members . see C. Grown and I. Valodia ( eds) Taxation and Gender Equity, Routledge 2010 • Found that: • Working age couples without children benefited most in cash terms • Single women pensioners benefited least • Households with male earners benefited in cash terms more than those without male earners • Reflects different car usage by men and women • See J. De Henau and C. Santos (2011) Gender Analysis of Changes in Indirect Taxes introduced by Coalition Government, 2010-11, http://wbg.org.uk/pdfs/Indirect_tax_Budget_2011_final_report_June_20.pdf

9. GEIA of combined changes to direct and indirect taxes and benefits • WBG joined with Fawcett Society to persuade Institute for Fiscal Studies, leading analysts of incidence of all tax and benefit changes, announced by March 2011, to produce a GEIA, using gendered household characteristics approach • Analysis shows loss as a proportion of net income • Some key results ( Source: www.ifs.org.uk/publications/5610) • In single adult households, women lose more than men. Lone parents hardest hit • lone mothers lose about 8.5% of pre-change income • lone fathers lose about 7.5% (this is a very small group) • However, in childless single adult households • single males ( who on average have higher incomes than single females) lose about 3.8% • single females lose just over 3% • In couple households • couples with children lose about 6.5% • couples without children lose about 2.6%

10. GEIA of tax indirect measures in 2013 Budget • No account taken of work of WBG and IFS. • Equalities impact of the reduction in fuel duty states: •  “No impact is expected on groups sharing protected characteristics.” •  This disregards the evidence that men are more likely to be buyers of petrol than women, and thus to gain more from this measure. • Analysis impact of the reduction in beer duty is better and states :  • “Due to differences in beer consumption, any change to beer duties will have an equalities impact. Men are more likely to drink beer than women, and younger people are more likely to drink beer than older people.” • But no attempt to quantify impact and highlight fact that men gain more than women. • Lack of consistent methods suggests that the GEIA is not being used to inform policy making, and is merely a pro-forma exercise conducted after policy has been decided, with no oversights to check the quality and consistency of the methods used and the statements of impact. • Source: The Impact on Women of Budget 2013, http://wbg.org.uk/pdfs/WBG_Budget-Analysis_2013.pdf

11. GEIA of income tax changes in 2013 budget For 2014/15 onwards, personal allowance raised to 10,000, higher rate threshold increased by 1% HMRC holds data on income tax payers by gender. The GEIA says: ‘• 24.5 million individuals gain an average of £50, of which 13.9 million (57 per cent) are male and 10.7 million (43 per cent) are female’ . • ‘257,000 individuals taken out of tax altogether, of which 111,000 (43 per cent) are male and 145,000 (57 per cent) are female’ • ‘0.47 million individuals lose an average of £50, of which 0.40 million (84 per cent) are male and 0.08 million (16 per cent) are female. ‘ • IA on individuals notes that ‘All of these have incomes above the breakeven level near £120,000 at which the personal allowance is tapered to zero and so no benefit is derived from the personal allowance increase.’

12. WBG analysis of income tax changes in 2013 Budget • Small gains for most taxpayers, the majority of whom are men, but many women who already earn below the current tax threshold, gain nothing. • No data on male and female shares of those who do not gain • HMRC GEIA fails to point out that women “taken out of tax altogether” gain less than the full £50 since they cannot make use of the full rise in the personal allowance. • Many of income taxpayers in the lowest income household will gain just 32p a week. because they will have 65% of the gain tapered back through the Housing Benefit (HB), and 20% or more tapered back through their Council Tax Benefit (CTB). Women will be likely to be more affected than men, but no gender breakdown is given by HMRC • Three quarters of the gain will go to households in the better-off half of all taxpayers. On average, households in the poorest 10% of the distribution, where relatively few people earn above the personal tax allowance would gain just £6 a year. In contrast, the richest 10% of households gain an average of £87 a year

13. Corporation tax and GEIA • Corporation tax- will be 20% by 2015 –‘lowest of any major economy’ • HMRC excludes corporation tax from equalities impact assessment • ‘This measure concerns the taxation of the body corporate which is a non-gender/race specific entity in law. As such it is very unlikely that there will be any impact on equality. ‘ • But revenue forgone means less money to spend on services and welfare benefits that are vital to women’s well being • No evidence that low rates of corporation tax stimulates job creation, though does stimulate ‘ghost’ offices • Tax avoidance tends to make corporation tax ‘voluntary’ for MNCs • Lip service to tackling this • But continued failure to end the many tax havens under UK jurisdiction • Taxation of corporations is a gender issue