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26 Mar 2018

Sanyu Awori, Programme Officer at IWRAW AP

Corporate Tax Incentives and Women’s Rights

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Corporate tax and women’s rights are inextricably linked because they expand or shrink government resources that could be invested in the public interest, and this has an impact on women.

Too frequently, governments offer tax incentives, such as low corporate income tax, reduced custom duties or free trade zones to corporations with the aim of encouraging foreign investment. However, the effect of these corporate tax incentives is to promote a race to the bottom and cost governments billions in lost revenue.

The revenue lost from corporate tax is staggering. It is reported that 138 billion $ has been lost in tax incentives. This made even worse by a tax system that enables tax abuse by corporations and the corporate elite.

Governments must then find alternative ways to collect revenue, and this often comes in the forms of consumption taxes such as value added taxes (VAT) or a goods and services tax (GST). Consumption taxation schemes disproportionately impact impoverished communities who have less but are asked to pay for more.

There are also gender dimensions to consumption taxes. Women are overrepresented in precarious jobs that have low wages and no social protection. Prevailing gender social norms and an unequal division of labour in the home, translates into women spending more time than men caring for their families. This means women are buying and paying more for basic goods that are priced heavily.

Instead of providing expansive tax incentives, governments should fairly tax corporations so that this revenue can be invested in ensuring there are adequate, available and accessible public services and social protection schemes. Revenue could also be used to redistribute the care burden that falls on the shoulders of girls and women. Magdalena Sepúlveda Carmona’s report as the UN Special Rapporteur on Extreme Poverty and Human Rights highlights how “transferring and redistributing wealth through taxation has the potential to redress systemic discrimination.”

Most tax incentives are also targeted at foreign multinational corporations, which works to the disadvantage of local small and medium traders and enterprises. This also impacts women, when for example, a majority of women in Sub-Saharan Africa work in the informal sector but are paying more tax than big business, face more barriers to compete and are carrying the burden where wealthier corporations should. 

The rhetoric of corporate tax incentives and foreign direct investment is strong, but evidence shows that tax rates are not a primary consideration for investors. A survey showed that 93% of investors in East Africa would invest anyway even with no tax incentives. Instead, political stability, market size, infrastructure and governance are on the priority list. Yet Kenya loses an estimated 1.1 billion$ a year by offering corporate tax incentives and exemptions.

Even more problematic is that corporate tax incentives are rarely made public and are often unaccounted for in national budgets. This secrecy breeds corruption. Tax exemptions and privileges need to be subject to public debate and parliamentary oversight. In Sierra Leone, for example, the national constitution provides that parliament must approve any tax waivers.

Concerted action at the national, regional and international level is necessary to ensure an equitable tax system where any exemptions are designed to favour the public interest. The Bogota Declaration is an urgent call to shift the status quo in favour of tax justice for women’s rights and gender equality, and we must listen.