Tax burden reinforces gender inequality : Revista Pesquisa Fapesp

In 2015, market research commissioned by the New York City Department of Consumer Affairs found that products aimed at women were, on average, 7% more expensive than goods targeting men. Later studies, carried out in the United States, Spain, Turkey, Brazil, and other countries, even found this price difference in goods marketed to male consumers, then packaged with an identical version for women. The phenomenon became known as the “pink tax” and was added to the list of obstacles to gender equality.

Although not effectively a tax, but rather a surcharge, the pink tax aroused the curiosity of tax law researchers, who asked: does the tax structure itself reinforce gender inequality? By analyzing tax laws in association with the use of empirical data, it was possible to show that, in fact, women do bear a greater tax burden than men, under various circumstances, from the deduction of alimony in the income tax to the consumption of essential goods.

“The pink tax was a trigger for gender discussions in taxation because it shed light on women’s demands,” says legal scholar Luciana Grassano Melo, from the Federal University of Pernambuco (UFPE). “Feminism comes in waves and its association with the topic of fiscal policy has advanced a lot in the last decade. But in each country the issue appears differently, depending on how taxation is carried out. Patriarchal social and family relationships are reflected in the legal system. And this is also expressed in the tax system.”

Melo is one of the editors of the book Política fiscal e gênero (Fiscal policy and gender), released in 2020, featuring ten chapters that discuss how the tax collection and expenditure systems of the Brazilian government contribute to perpetuating and even intensifying gender inequality. The writers reveal several problems, from the effect the unequal division of domestic tasks has on the retirement calculation, to the disparity in personal expenses, since women mostly spend on expenses that benefit the family as a whole, even though their remuneration is, on average, lower.

Tax reform
The increase in studies regarding gender in tax law coincides with a period during which discussions on reforming the tax system have intensified in the Brazilian Congress. Prospective bills, in both houses of the federal legislature, are focused on ways to make the Brazilian tax system more efficient, agile, and simple. On the table are proposals that unify fees, eliminate exemptions, and reduce bureaucracy.

Tax experts complain, however, about the silence around gender inequality. “How can we have this discussion without taking gender into account? It’s not a question of niche or identity, but of the structure of the system itself, and its impact on society,” argues law professor Tathiane Piscitelli, from the Fundação Getulio Vargas School of Law in São Paulo (FGV-SP). The researcher is one of the coordinators of the Gender and Taxation study group, founded in 2020 as a partnership between the Center for Tax Law at the FGV-SP law school and the Tributos a Elas (Taxes for women) group, made up of prosecutors at the Attorney General’s Office of the National Treasury (PGFN). Prosecutor Núbia Castilhos is the other coordinator.

Responding to this silence around the impact of taxes on women, the group published their report, “Reforma tributária e desigualdade de gênero: Contextualização e propostas” (Tax reform and gender inequality: contextualization and proposals). The progress of the tax reform projects have given urgency to the studies, Piscitelli says. “Although the group was new and had no academic publications yet, we saw that it was time to intervene in the public debate. Our report served to show that despite the existence of bills in Congress dealing with women’s tax issues, the topic is not being addressed systematically in the discussions on tax reform,” she points out. “This is still quite an emergent issue in Brazil.”

In the report, the proposals range from exempting essential products for women, such as sanitary pads and drugs used in hormone replacement, to changes in income tax deductions that favor men. The group also suggests ways to encourage social mobility for those with lower incomes, which involve reimbursing domestic workers’ deductions for social security contributions and creating programs that encourage hiring women in situations of vulnerability.

Piscitelli notes that one of the principal questions that guide the group’s research is “whether the tax benefits that exist today are in line with the values of the social and democratic state under the rule of law.” The FGV professor points out that these benefits are, indirectly, public expenses and, therefore, “represent the state’s investment in a certain area.” Therefore, she observes, they must reflect the values of the constitution, which holds equality as one of its basic tenets.

Child support: how a seemingly egalitarian principle can embed a source of inequality

The main purpose of a tax is revenue collection, since the government levies taxes to finance its expenses and administer public benefits. In legal terminology, this is the “fiscal function” of the tax. But some taxes aim to encourage or inhibit behaviors, such as customs fees, which can protect domestic markets, and more recently the idea of a carbon tax, conceived as a tool to mitigate the effects of the climate crisis. This is known as an “extra-fiscal function.”

Both functions can either intensify inequality or combat it, points out attorney Isabelle Rocha, who holds a law degree from the Pontifical Catholic University of Minas Gerais (PUC-Minas) and wrote the book Tributação e gênero: Como o imposto de renda da pessoa física afeta as desigualdades entre homens e mulheres (Taxation and gender: How the individual income tax affects inequalities between men and women) (Dialectics, 2021). One example of how the fiscal function generates inequality is the regressiveness of the Brazilian tax system, under which taxes weigh more heavily on the country’s poorest. This is because consumption is taxed more than income or wealth. The poor consume almost everything they receive, unlike the rich, who are able to save and invest. Another reason is that the highest income tax bracket in Brazil, 27.5%, is comparatively low. In the United States it’s 37% and in Sweden it can be as high as 52.9%.

Rocha points out that Brazilian tax law theorists have been increasingly accepting of the idea that income tax should be used as a tool to mitigate inequality, with both its fiscal and extrafiscal functions. But this is not the traditional perspective in Brazil. On the contrary, national tradition considers that the tax should be fashioned to alter people’s decision-making as little as possible, based on a principle of neutrality. “The classic approach to tax law analyzes the conflict between the tax authorities and the taxpayer, looking for ways to protect the citizen in the face of potential arbitrariness by the tax authorities,” Rocha says.

For this reason, studies that emphasize tax justice may be met with resistance in the legal arena. “My research on this topic was criticized on the grounds that there’s no constitutional grounds to combat gender inequality through taxation, because the Constitution only provides for privileged tax treatment in two cases: cooperatives and micro or small businesses, but not women,” she says. “However, I’m not talking about privileged treatment, but rather correcting an existing inequality being replicated by the tax laws. And clearly there are constitutional grounds. Equality between men and women is in Article 5 of the Constitution.”

The case of child support is the most cited example of how an apparently egalitarian principle can embed a source of inequality. The support payment is fully deductible from income by the payer but is taxed as income for the recipient. The calculation base is reduced on one side and increased on the other. However, according to the 2020 Civil Registry Statistics released by the Brazilian Institute of Geography and Statistics (IBGE), of the total number of divorces with children in Brazil, child custody goes to the mother in 57.1% of cases, with the father paying child support. As a result, an instrument that should serve to relieve childcare ends up becoming a tax burden for women.

Alexandre Affonso

In February, a majority of the Federal Supreme Court (STF) judged the collection of tax on those who receive alimony to be unconstitutional. The judgment, however, was interrupted by a pedido de destaque (“eminent request,” meaning the issue in question must be removed from the virtual court to in-person hearings) by Minister Gilmar Mendes. “The Supreme Court’s solution is not necessarily the best way forward, because this income will end up not being taxed on either side, which could also come into question,” says Rocha. The researcher believes the problem should not be solved by the Judiciary but dealt with by Congress.

Melo, from UFPE, observes that her research is at the intersection between tax law and the sociology of law, with influences from feminist authors such as the American theorist and activist bell hooks (1952–2021). Understanding the effects of fiscal policy from the perspective of gender and other variables, such as race, requires looking beyond legal codes and principles. Rocha notes that in her study on the income tax issue, she used statistical data such as those provided by the Federal Revenue Service, based on returns sent in by taxpayers, and information from the IBGE, particularly the National Household Sample Survey (PNAD).

“Working with empirical data is increasingly necessary in tax law. Especially for me, someone working on the subject of tax justice, at the intersection between the way the Brazilian state taxes and the protection of human and social rights,” says Melo. “For example, to claim that the tax system is regressive, we need to be able to show that the burden is greater on the poor. And today we’re able to show this because we have better and better data. Otherwise, we would be dealing with opinion, not facts.”

However, the UFPE professor regrets that the data from the Federal Revenue do not address the issue of race. “The income tax return asks about everything: occupation, gender, place of residence, marital status. But it doesn’t ask about race. In a country like Brazil, this variable shouldn’t be missing. It hinders research, because I can only show what happens with race in Brazil by resorting to other data, for example, from the IBGE,” she says.

The lack of racial data also affects our understanding of gender problems, says Melo, emphasizing that the different forms of inequality are inseparable. In the Brazilian economic hierarchy, the situation for nonwhites is worse than that of whites and that of women is worse than that of men. So the most vulnerable population is black women.

Bárbara Quintino

“In many of the topics we deal with when associating taxation and gender, we’re only talking about consumers who are part of the richest 10% of society, that is, the top of the pyramid. Such is the case with income tax and, to a certain extent, with the pink tax,” argues Melo. “On the other hand, one discussion that’s gained momentum recently is regarding the free distribution of sanitary pads. For a country with such a large population of poor, black women, it’s a very important discussion. If a woman can’t afford to purchase sanitary pads, how will she consume other items packaged as feminine products?”

Sanitary pads are an oft-mentioned case of tax injustice. As an essential product for women during their reproductive years, it brings to the fore legal principles that haven’t always been respected by Brazilian taxation. Such is the case with the principles of essentiality and selectivity, which would require that tax rates be defined according to how necessary a commodity is for people. In other words, from the perspective of tax justice, luxury goods should receive higher tariffs than basic food, medicine, and personal hygiene products, which is not always the case. “Nothing is more obvious than the essential character of sanitary pads for women. It’s a biological necessity,” says Piscitelli. “It’s also a matter of human dignity, one of the foundations of the Constitution.”

According to the report “Pobreza menstrual no Brasil: Desigualdade e violações de direitos” (Menstrual poverty in Brazil: Inequality and rights violations), published last year by the United Nations Children’s Fund (UNICEF) and the United Nations Population Fund, 713,000 girls live without a toilet or shower at home and 4 million attend schools that lack at least one type of hygiene requirement in Brazil. Twenty-eight percent of girls have skipped classes because of menstrual poverty. The document is based on data from the 2013 National Health Survey, the 2015 National School Health Survey, and the 2017 and 2018 Household Budget Survey.

The leading tax reform proposals being discussed in Congress involve replacing the various rates that currently exist with a single Value Added Tax (VAT), and a single rate for all products. At first glance, the measure is contrary to the principles of selectivity and essentiality. However, according to economist Débora Freire, from UFMG, reducing tariffs or exempting a particular good may not be the best way to alleviate female consumers’ tax burden. Freire argues that policies that tried using tax incentives in Brazil had less effect than expected, generated inefficiencies, and failed to achieve greater tax fairness.

“There’s no guarantee that a tax reduction or exemption on a product will reduce its price, because in imperfectly competitive markets manufacturers may simply pocket the difference. Another problem is that for poor families, even if the cost goes down, it may not make a difference when deciding where to spend what little money they have. And in the end, the exemptions don’t take into account the ability to pay, in other words, they apply equally to all income brackets,” she observes.

For the economist, there are two strategies that are more effective in combating menstrual poverty. The simplest is the free distribution of sanitary pads at the Family Health Program clinics. “Experience in the distribution of basic items, such as medicines, shows that those seeking this service are the most needy,” she says. “Thus, such spending would be more progressive, affecting the poorest in greater proportion.” The second strategy is the creation of a tax refund system whereby, based on the Single Registry for Social Programs, (CADÚNICO), the government would deposit reimbursements to the neediest families according to the taxes they had paid on expenses for essential products, including sanitary pads. “This would ensure that the poorest families are actually impacted by public policy, unlike with tax relief,” she points out. Freire points out, however, that this shouldn’t just be a government policy, subject to changes in orientation or budget cuts. “It would be necessary for this system to be included in the Constitution, as was done with the Unified Health System,” she concludes.

According to Piscitelli, despite occasional successes with the distribution of sanitary pads, the strategy has revealed weaknesses in Brazil. “The argument for greater efficiency in public spending compared to the tax benefit is strong, but there are often setbacks in public policies, which reduce distribution and directly affect low-income women. For this strategy to work, real budgetary control would be necessary, with analysis from a gender perspective. But in Brazil we have neither one thing nor the other: distribution via spending is subject to interruptions, as happened last year with the presidential veto, and the tax incentive is sidelined as well,” she laments.

Like Freire, Melo argues that the case of sanitary pads demonstrates how, in tax policy, gender-related problems cannot always be resolved directly through taxation. “When we talk about tax injustice, both sides are relevant, both tax collection and public expenditure,” she says. The researcher believes that in order to reach the most vulnerable women, public policy is essential, including action on the expenditure side. “The tax aspect is indirect, because the government needs to find the source of funding to support this policy. That’s where the tax comes in.”

Books
MELO, Luciana Grassano; SARAIVA, Ana Pontes; GODÓI, Marciano Seabra (orgs.). Política Fiscal e Gênero. Belo Horizonte: Letramento, 2020.
ROCHA, Isabelle. Tributação e gênero: como o imposto de renda da pessoa física afeta as desigualdades entre homens e mulheres. Belo Horizonte: Dialética, 2021.

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