By- Tehmina Sharma and Rakhi Modi
An inclusive work environment is the buzzword today. But has it really been gender equal, honestly? Knowingly or unknowingly, barriers are put up for women in the workforce, limiting their claim to leadership or to their growth prospects.
In India’s journey toward a US$ 5 trillion economy, this state of affairs poses a challenge for policy makers who must ensure that women are not left behind in the development agenda.
While there are several options to boost complete participation of women, relief in the form of tax exemptions for some years to encourage women to rejoin work after maternity, tax concessions for women entrepreneurs, tax rebates for childcare expenses, can cheer women professionals. These would not only promote gender equality but also unlock significant economic benefits for the nation.
As per the Ministry of Labour and Employment, female labour force participation in India, at 32.8%, has been much lower than the global average of 47%. There are also challenges for women to enter the labour market and continue to work, access to employment, choice of work, working conditions, job security, wage parity, access to childcare, etc. Typically, barriers to gender equality include supply-side aspects that make it difficult for women to find jobs or source finance, while demand-side barriers make it more costly.
The government has initiated many schemes for women empowerment, such as the Beti Bachao, Beti Padhao, grant-in-aid for building women hostels with day care facilities; the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 mandates that at least one-third of the jobs generated under the scheme, should be given to women.
Provisions have been incorporated in labour laws for equal opportunity for women, including enhancement in paid maternity leave, provision for mandatory crèche facility, permitting women workers in night shifts with adequate safety measures, etc. The Code on Wages 2019 also prohibits gender-based wage discrimination within an establishment; some companies also need to have at least one woman director on board.
Gender equality is one of the goals under the Sustainable Development Goal of United Nation’s 2030 agenda, and an aligned tax policy could be crucial to achieve that.
Many countries around the world provide tax incentives to women to encourage better participation in growth of the economy. Countries such as Malaysia, Cambodia, Republic of Korea, the Kyrgyz Republic, and the People’s Republic of China, provide income tax exemption to women who return to work after a career break. Preferential tax regimes for small businesses that employ a significant number of women is provided in Nepal, Sri Lanka, and Uzbekistan. Countries like Pakistan, Bangladesh, Nepal, and Sri Lanka provide tax incentives specifically for women-owned businesses.
In Argentina, a woman director’s fee has a higher threshold for taxation which encourages such appointments. In Equatorial Guinea, single women with more than 3 dependents under the age of 18, are exempt from individual tax. In Mozambique, women in domestic service are exempt from municipal personal tax.
Way forward
Gender Pay Gap: Women in India, despite their qualifications, often face a pay disparity compared to male counterparts. Tax concessions can help bridge this by increasing disposable income, as seen in Canada’s tax credit for childcare expenses.
Increased Female Workforce Participation: Tax breaks can incentivize women to enter or stay in the workforce, empowering them financially and contributing to overall economy. For instance, Australia’s childcare subsidy scheme has demonstrably increased female labour force participation.
Support for Single Mothers and Working Spouses: Many women bear the sole financial responsibility of their households. Tax concessions can provide financial relief for single mothers and working spouses, mirroring the benefits seen in the Philippines’ tax exemption for single parent.
Boosting Entrepreneurship: Offering tax breaks to women-owned businesses can encourage entrepreneurship and create new jobs, replicating the success of Malaysia’s preferential tax regime for businesses with a high percentage of female employees.
While incentives run the risk of distorting market and triggering redundant outcomes, calibrated implementation can be apt. Effectiveness of incentives will depend on underlying constraints to gender equality, targeted policy goals, implementation features and the broader enabling environment.
Further study by governments is vital to understand effects of tax reforms on enhancing women’s involvement in economic growth. Nonetheless, given the significant contribution from women for the economy, it is crucial to encourage their active participation in the workforce.
(Authors: Tehmina Sharma, Partner and Rakhi Modi, Senior Manager, Deloitte)
(Disclaimer: Views expressed above are personal views of the authors, and the publisher or the author disclaim all, and any liability and responsibility, to any person on any action taken on reliance of it.)