The UK Tax system from a gender
perspective
Jerome De Henau
The Open University
Women’s Budget Group training day
London, 30 January 2015
Overview
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Sources of tax revenue
Personal Income Tax and NICs
Gender effects
Indirect taxes
Changes in indirect taxation
Gender effects
Analysis of GIA by government
2
Main principles of a tax system – trade offs
 Collecting revenue
Efficiency: lowest cost of administration
Simple: avoiding loopholes for tax avoidance
 Providing incentives
Nudges (work incentives, attractiveness of savings)
Deterrent (tobacco, alcohol, polluting activities)
 Equity: normative fairness
Horizontal: taxpayers who are equal in economic terms
treated equally for tax purposes
Vertical: unequal individual from an economic standpoint
should be treated appropriately differentially for tax purposes
3
UK government total revenue 2014-15
Interest and
Other taxes and dividends
royalties
3%
5%
Business rates &
other
5%
£648.1 billion
Other receipts
4%
37.7% of GDP
Income tax
25%
Corporation tax
6%
Roughly £12,400
for every adult or
£10,000 per
person
Stamp duty
2%
Capital gains &
inheritance
1%
Council tax
4%
Other indirect
taxes
3%
Tobacco &
alcohol
3%
NICs
17%
Fuel
4%
VAT
17%
4
Note: Figures are for general government net receipts on a calendar-year basis.
Source: T. Clark and A. Dilnot, Long-Term Trends in British Taxation and Spending, IFS Briefing
Note 25, 2002 (http://www.ifs.org.uk/bns/bn25.pdf); National Statistics series YBHA and ANBY.
5
Personal income tax – tax base
 Tax base (taxable income)
Earnings from employment
Income from self-employment and unincorporated businesses
Jobseekers’ allowances (contributory)
Retirement pension
Income from property, interest on savings, dividends on
shares
 Exempt:
Most means-tested benefits
Some universal benefits (DLA)
Savings in ISA
 Deductible from taxable income
Employer and employee pension contributions (with limits)
6
Gifts to charities
PIT – schedule
Individual filing system: individual income
Total individual income
- exempt income
- deductions
Personal allowance
= taxable income
Amount taxed at 20%
Amount taxed at 40%
Amount taxed at 45%
7
PIT example – basic rate taxpayer
8
PIT example – higher rate taxpayer
9
PIT example – higher rate taxpayer (2)
10
PIT example – additional rate taxpayer
11
PIT – allowances
 Basic PTA (Under 65):
Up to £100,000 taxable income: £10,000 in 2014-15 (up to
£10,500 in 2015-16)
 Age-related allowances (ARA):
65-74: £10,500 (disappears next year as basic PTA catches up)
75+: £10,660 – tapered (50p) to basic PTA if inc. > £27,000
 Basic PTA and ARA tapered down to zero (50p) for income
above £100,000 (so = 0 when income reaches £120,000).
 Married couple allowance: gradually removed (abolished in 2000
except for older couples)
 Transferable Tax Allowance (from 2015-16): for married couples,
none in higher tax band, one spouse transfers part of taxable
income to other spouse if other spouse’s income is below basic
allowance (£10,500).
12
National Insurance contributions
 Contributions on earnings and income from employment
 Only due by those below state pension age
 Similar principles than PIT (progressive, basic ‘allowance’ before
contribution is due
 Employer’s contribution
 Weakening link to contributory benefits received (such as state
pension or JSA) – amount is collected to a fund and government
uses it to fund general spending (some earmarked for NHS)
 Different systems for employees and for self-employed
 For employees: 12% due between primary threshold (PT =
£7,956) and upper earnings limit (UEL = £41,860) and 2% above
it
 Employers pay 13.8% above PT
 Reduced rates for those who opted out of SERPS (below UEL)
13
PIT & NICse – higher rate taxpayer
14
Indirect gendered impact of income tax
 What determines tax levels
Position of men and women in earnings distribution (different
taxable incomes)
42% of taxpayers were women in 2014-15
75% of those below £11,000 gross earnings in 2013 were
women (And 25% of female earners were below PTA; 9% men)
Types of income (dividends/earnings) by gender (different tax rates)
Differences in age (ARA)
 Men pay more tax than women (on earnings)
 BUT: analysis of changes in tax rules
Gainers and losers against counterfactual
In % of income
In cash contribution
15
Indirect gendered impact of income tax
 Increase in PTA
% of beneficiaries who are women
Those who do not benefit fully
Those who do not benefit at all
Cost of measure in foregone revenue
Knock-on effects on auto-enrolment
16
Indirect gendered impact of income tax
 Increase in PTA (to £10,000 and more)
% of beneficiaries who are women
 43% of beneficiaries
Those who do not benefit fully
 53% of women (near PTA)
Those who do not benefit at all
out of tax (one-off) and no income tax (63% women)
Cost of measure in foregone revenue
 £12bn equivalent to further cuts in social security
Knock-on effects on auto-enrolment
 auto-enrolment only for those above PTA
17
Horizontal equity – households with same
total income
 Individual filing system: each adult/earner files their income
separately and the tax schedule applies to their individual
taxable income
 Joint/family filing system: the total income of the couple is
pooled and income tax applies to this total, with different
systems providing different deductions for dependent spouses
 Mixture: transferable allowance (future TTA, former MCA)
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Horizontal equity – households with same
total income
Discussion (families with two dependent children):
 Dual-earner couple each on £15,000
 One-earner couple on £30,000
 Single-earner (lone parent) on £30,000
Income tax bill without TTA and net income? Ignore NICs
And with TTA? (assume couple is married and max TTA= £1000)
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Horizontal equity – households with same
total income
Income tax bill without TTA and net income?
£15,000 gross  tax = (Gross-PTA)*20% = £1000
 Net = £14,000 *2 = £28,000
£30,000 gross  tax = (30,000-10,000)*20% = £4000
 Net = £26,000
Income tax bill with TTA?
Only for one-earner couple (assumed married)
Tax due on £30,000-10,000- £1000 Tax= 20%*19,000 = £3800
 Net = £26,200
Income split (Germany): one-earner couple  total gross/2 and
taxed individually  net £28,000 and not £26,000
 Value of unpaid contribution: taxed or not?
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Work incentives – effective tax rates
 Intensive margin: participation/average tax rate (work at all?)
 Extensive margin: marginal tax rate (work more hours?)
 Important for second earners:
Individual versus joint taxation
Combined effect of tax and withdrawn benefits(when meanstested)
Changes in PTA (mainly marginal tax rates)
Other work-related costs: care replacement, commute
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Work (dis)incentives – effective tax rates
AETR (PTR) w/cc into hr of woman's employment - Man 40h
120%
100%
no c in hh
80%
1c in cc
3c in cc
60%
2c no cc
40%
2c in cc
lp 2c in cc
20%
0%
0
10
20
30
40
50
Childcare cost £4.4 ph per child; hourly wage both partners at £16; childcare needed for 1.12
times min. hours worked; 15h free childcare 38 days a year for 3-4y; 1c 2y, 2c 3-4y, 3c 2-3-4y
22
Work (dis)incentives – effective tax rates
AETR (PTR) w/cc into hr of woman's employment - Man 40h
180%
160%
140%
no c in hh
120%
1c in cc
100%
3c in cc
80%
2c no cc
60%
2c in cc
40%
lp 2c in cc
20%
0%
0
10
20
30
40
50
Childcare cost £4.4 ph per child; hourly wage both partners at £6.50 (min wage); childcare
needed for 1.12 times min. hours worked; 15h free childcare 38 days a year for 3-4y; 1c 2y, 2c
3-4y, 3c 2-3-4y. Family on Universal Credit with 85% childcare element
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Indirect taxes – VAT
 VAT (tax on value added, paid on final expenditure but claimed
back for intermediate inputs)
 Mainly regressive (proportional tax on expenditure) but:
20% standard rate (up from 17.5%)
5% reduced-rate (energy saving products, contraceptive and
women’s sanitary, children’s car seats, domestic fuel and
power, etc.)
0% rate (food, construction of new dwellings, children’s
clothes, prescription drugs, books, water and sewerage
services, etc.)
Exempt (rent on domestic dwellings, private education, health
services, finance and insurance, postal services, funeral, etc.)
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Indirect taxes – duties
 Most duties work in similar ways
Tax as percent of quantity sold
For tobacco, also proportion of price.
 Again proportionality makes them regressive
 However, tax incidence depends on consumption patterns
Lower income hh consume relatively more tobacco and
alcohol, hence are taxed more (as % of income) 
regressive
Lower income hh consume relatively more zero-rated items
(food, children’s clothes) thus lower tax incidence 
progressive
Gender analysis by gendered household types
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Indirect taxes – change in rates
 Need to look at household types and composition by genderrelevant characteristics:
number of earners,
age of adults (pensioners/working-age)
couple/single
presence of children
 All have different spending priorities which will drive differences
in tax burden and contributions
Men smoke and drink more than women
Smoking also larger proportion of lone parents’ budget than
other parents (smoke more and lower income)
Men commute longer distances and more likely to drive than
women
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Indirect taxes – change in rates
 Increase in VAT
 Scrapping fuel duty escalator
 Cuts in alcohol duties
 Increase in tobacco duties
 Removing air passenger duty for children
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Indirect taxes – change in rates
 Increase in VAT
Impact more on low income despite zero-rated goods
 Scrapping fuel duty escalator
Benefits men
 Cuts in alcohol duties
Benefits men
 Increase in tobacco duties
Benefit women but not lone parents
 Removing air passenger duty for children
Unclear but likely to benefit women more although lower
income families with children (most of which headed by
women) do not fly much
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Indirect taxes – change in rates 2010-2011
% pts change in total indirect tax incidence (May 2010 - April 2011)
- for working-age households with and without children by gender
of earners
2.00%
1.50%
1.00%
0.50%
0.00%
All earning
Male sole earner
with children
Female sole
earner
None earning
without children
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Indirect taxes – change in rates 2010-2011
% pts change in total indirect tax incidence (May 2010 to April
2011) - for couple and single adult households by decile of
equivalised hh incomes
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
D1
D2
D3
Couple hh
D4
D5
Single man hh
D6
D7
D8
D9
D10
Single woman hh
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Other taxes
 CGT on difference between asset value at sale and at purchase
Except for main house
On decease
Capital below a threshold (£11,000)
 18% for basic rate taxpayers and 28% for higher rate taxpayers
 Inheritance tax
 Corporation tax (21% standard rate, 20% reduced rate)
 Stamp duty tax
 Business rates
 Other
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Gender impact assessment - Treasury
 Equality Duty towards protected groups (gender, age,
disability, sexual orientation, ethnicity, gender identity)
 “Due regard”
eliminate unlawful discrimination
advance equality of opportunity
foster good relations
 Three aims to be considered together
 Common TIIN statement for income tax
“Equalities impacts will reflect the composition of the income taxpaying population”
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Gender impact assessment - Treasury
Discuss:
 TTA (married couples, one spouse below PTA, other nonhigh earner)
“Couples will benefit as a unit, but the majority (84 per cent) of individual
gainers will be male. This reflects earning patterns in the population
more generally.”
 Excise duty (end of escalator, freeze in cider and spirit
duty, cut in beer duty by 1p)
“Men are more likely to drink beer and women more likely to drink wine”
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Gender impact assessment - Treasury
Discuss:
 40-year rolling exemption from Vehicle Excise Duty for
classic cars (about 10,000 owners of classic car)
“There will be no significant impacts as a result of these changes.”
 Capital gains business asset roll-over relief (mainly farmers
benefit)
“The gender split for CGT payers is relatively stable over time, with
around 60 per cent of filers male and 40 per cent female. It is not
known how this pattern might change for farmers but we do not expect
this measure to create a disproportionate impact on a particular group
of people.”
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Further reading
 Taxation and gender equity analysis of different countries
(explicit and implicit biases)
Grown, C. and Valodia, I. (eds) (2010) Taxation and gender
equity. A Comparative Analysis of Direct and Indirect Taxes in
Developing and Developed Countries, New York: Routledge
 IFS summary of tax system (not gendered but good
explanation, especially all the minor taxes)
Pope, T. And Roantree, B (2014) “A Survey of the UK tax
system”, Institute for Fiscal Studies, Briefing Note 09, November
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