Women earn less — and are penalised under tax regime

Female-headed households are common in SA, yet women carry a greater tax burden.

Ironically, equality across the gender spectrum in the tax system is what tips the financial scales against women.

This is according to Dr Lee-Ann Steenkamp, head of the postgraduate diploma in financial planning at Stellenbosch Business School and a contributor to the SA Board for People Practices 2022 Women’s Report released on Monday.

She illustrated this with the tax liability of a dual-earning household with two minor children and a combined income of R204,000 a year vs a single-earner household, also with two minor children and earning the same amount.

While both partners in the dual-income household benefit from the primary tax rebate of R16,425, resulting in a total tax liability of R3,870 a year, the single-earning household only benefits from the rebate once and so pays R20,295 in tax, on the same income.

“Given that nearly one-fifth of SA households consist of a single person, this tax discrepancy warrants closer attention, especially as it has a significant gender bias impact.”

Far more children (41.7%) live with single mothers than with single fathers (4.4%), meaning the added tax liability of single households falls predominantly on women, she said.

SARS tax statistics also illustrate that the gender pay gap still persists: while women make up almost half of taxpayers (46%), they pay only about one-third of total income taxes and are concentrated in the lower tax brackets. Women make up only 14% of the earners in the highest bracket.

“This disparity is symptomatic of the country’s historical gender pay gap and socioeconomic inequalities,” said Steenkamp.

VAT, the country’s second-largest tax revenue stream, also falls disproportionately on women, the research showed.

As primary caregivers and generally carrying more of the responsibility for collective household needs such as food, health and education, women spend a greater share of their already lower income on these needs, and thus carry a greater burden of VAT contributions, the report found.

Steenkamp proposes that the government consider:

• expanding the zero-rating of VAT on goods and services that support households; and
• incorporating elements of affirmative action in favour of women into the income tax regulations.

These could include higher tax thresholds for women, tax breaks for female-owned businesses, reduced tax rates on property owned by women and tax deductions for childcare costs.

Reintroducing the child tax rebate that was available pre-1994 should also be considered, she said, as a form of tax relief for childcare costs. Capping the rebate by income level and means-testing would ensure equitable treatment, ensuring those in higher tax brackets do not benefit unfairly.

“Applying affirmative action to tax laws, to redress the disproportionate impact of VAT and personal income tax on women, especially single mothers, would support SA’s goal of inclusive economic growth and encourage greater labour force participation and entrepreneurship by women,” she said.

Women’s Report editor Prof Anita Bosch, the research chair for Women at Work at Stellenbosch Business School, said though men and women are treated the same “on paper” regarding taxation, retirement funds and social grants, the policies in practice create lifelong financial inequality for women.

Bosch said the report provides a deeper understanding of “the myriad balls women have to juggle, trying to progress while also providing”.

“Greater consideration of the facts of life in SA that hamper women’s advancement is needed in fiscal policy-making,” she said.

An approach covering tax, social grants, retirement funding and gender-based budgeting “should aim to halt the downward spiral of odds that progressively stack up against women as they navigate life”.

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