Working women in South Africa have made progress in achieving equal pay for equal work, but the financial scales are tipped against them due to the country’s tax system, which treats women and men equally but with unequal outcomes.

Applying affirmative action to tax laws to address the disproportionate impact of VAT and personal income tax on women, particularly single mothers, would support South Africa’s goal of inclusive economic growth and encourage greater female labor force participation and entrepreneurship.

South African Tax Statistics [i] to address gender inequality for lower-income women and the discrimination against single-parent families, who are taxed significantly more than two-parent households at the same income level. Due to the prevalence of families in which female breadwinners and single mothers bear most of the responsibility for raising children, this places a disproportionate tax burden on women.

I am a co-author of the 2022 Women’s Report produced by the SA Board for People Practice (SABPP) in partnership with Stellenbosch Business School.

South Africa’s previous discriminatory apartheid-era tax system, which particularly disadvantaged working married women, was abolished after 1994, and tax laws now treat men and women equally, regardless of marital status.

However, equal treatment did not produce equal results.

“Despite the elimination of obvious tax discrimination in the past, the new order aimed at equal treatment of all taxpayers had unintended consequences in connection with the realities of modern society. By putting single-parent households at a disadvantage, the revised tax system with its unisex tax brackets has actually deepened the tax gap between men and women.

Consider this example of the tax liability of a family with two minor children and a combined income of R204,000 per year compared to a single-head family who also has two minor children and earns the same amount.

While both partners in a dual-income household benefit from a primary tax credit of R16,425, bringing the total tax liability to R3,870 per year, a single-income household only benefits from the credit once and thus pay 20,295 Rand in tax on the same income.

*This chart represents the tax disparity using information for the 2023 tax year

Tax disparity in households
Household composition Household with double kennels A farm with one owner
Working husband (earns RM9,000) Working single mother (earns RM17,000)
Working wife (earns RM8,000)
Two minor children Two minor children
Husband Wife In total A single mother
Taxable income 108,000 rubles 96,000 rubles 204,000 rubles 204,000 rubles
tax 18% 19,440 rubles 17,280 rubles 36,720 rubles
Under: Primary discount (<65 years) – 16,425 rubles – 16,425 rubles – 16,425 rubles
Income tax liability R3 015 R855 R3 870 20,295 rupees
The difference: 16,425 rupees

Given the fact that almost one-fifth of South African households are made up of one person, this tax disparity warrants closer attention, particularly as it has significant gender-biased implications.

She said more than 40% of households in South Africa are headed by a single female breadwinner, while significantly more children (41.7%) live with single mothers than with single fathers (4.4%). which means that the liability for additional tax on lone families is reduced. mainly on women.

Sars tax statistics also show that the gender pay gap still persists – while women make up almost half of taxpayers (46%), a proportion that is slowly but steadily increasing, they pay only around one-third of total income tax and concentrated in the lower tax brackets.

South Africa’s progressive income tax system, where those who earn more are taxed at a higher rate, is designed to achieve wealth redistribution, but they also show that women’s taxable income is still significantly lower than men’s, with women making up only 14% of those who earn in the highest category. This disparity is a symptom of the country’s historically existing gender pay gap and socioeconomic inequality.

I have also analyzed the impact of VAT, the country’s second largest tax revenue stream, and argue that as a consumption tax it falls disproportionately on women.

Being the primary carers and bearing more responsibility for common household needs such as food, health and education, women spend a greater proportion of their already low income on these needs and thus bear a greater burden of VAT contributions.

I suggest that the government consider extending the zero-rating of VAT to household goods and services, as well as incorporating affirmative action elements for women into the income tax rules.

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

The reintroduction of Child Tax Credit, which was available until 1994, should be seen, she said, as a form of tax credit for childcare costs. Limiting the discount based on income level and means testing would ensure fair treatment, ensuring that those in higher tax brackets do not benefit unfairly.

In terms of public spending, it is worth noting that a lack of resources for public services such as health and education has often resulted in women and girls being forced into unpaid or low-paid care work. Expanding access to free or affordable health care, education, water and social protection, or through social payments (grants) for care work, would free up more women to earn a decent income.

Fiscal policy can and should be used to address gender inequality and support a broader national transformation agenda.

Women’s Report editor Professor Anita Bosch, head of research for Women at Work at Stellenbosch Business School, said the 2022 report analyzes South Africa’s fiscal policy through the lens of gender equality. Although men and women are treated equally “on paper” in terms of taxation, pension funds and social grants, in practice these policies create financial inequality for women throughout their lives.

Bosch said the report provides a deeper understanding of the “myriad swords that women have to juggle as they try to progress while providing.”

“This edition of the Women’s Report shows that the development of fiscal policy needs to take more account of the facts of life in South Africa that hinder the advancement of women. This approach, which spans tax, social benefits, pension funding and gender budgeting, must aim to stop the downward spiral of the odds that are gradually stacked against women as they move through life.”

“Without such informed and dedicated action and focused justice, solving the problems of the poorest of the poor and ending the cycle of poverty for the current generation of children will remain a mere wishful thinking,” she said.

Download the 2022 Women’s Report here

Dr Lee-Anne Steenkamp is Head of the Postgraduate Diploma in Financial Planning at Stellenbosch Business School.

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