Taxation and Gender Equity: A Comparative Analysis of Direct and Indirect Taxes in Developing and Developed Countries

Pinaki Chakraborty , Lekha Chakraborty, Krishanu Karmakar and Shashi M. Kapila

Until India's structural adjustment programme was introduced in 1991, much of the discussion about tax policy in the country was shaped by a debate on how to raise sufficiently large amounts of revenue to eliminate poverty and raise standards of living while at the same time support national industries under a protected regime. Fiscal reforms since 1991 have made rapid and significant changes in tax policy and have brought down the rates of both direct and indirect taxes sharply. They have also touched off some new discussion on the gender dimensions of such changes, especially in the case of direct taxes.

To understand these and other impacts of tax policy, this chapter presents a gendered picture of employment and income in India, and reviews the overall tax structure, including a series of tax reforms and the gender impacts thereof. It presents the results of several simulated policy changes that might advance gender equality and concludes with a consideration of their implications.

A study of the gender impacts of tax policies in India is both timely and important. India is, as we shall see, one of the few examples where taxes have been used as an affirmative action policy – women in India are explicitly advantaged by some aspects of the tax system and reforms. Is this effective, and does it really advantage women, especially those in low-income groups? The central government and state governments of India are now considering the introduction of an integrated goods and services tax in fiscal year 2010/11. What are the likely impacts of this new system on women and on poor households? The analysis here suggests that indirect taxes currently place an unfair burden on women, especially those in low-income households; if this burden is not taken into account in the reforms, these women are likely to bear a large negative share of the impact from the reforms.

India has a total population of around 1.2 billion. Of this, some 417.9 million people are in the labour force, with 323 million in the rural labour force and 94.7 million in the urban labour force. Women are over-represented in the rural workforce. Of a total of 139.4 million women in the labour force, 118.3 million are in

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