The Nigerian Economy: Achieving Sustainable Development Through A Gender Inclusive Tax

Being a Paper Presented by Prof. Fatai Aremu, the Executive Director of Research Enterprise Systems, at the National Maiden Tax Summit of the Society of Women in Taxation (SWIT), Nigeria.

Protocol

INTRODUCTION

The Nigerian economy has experienced significant growth in recent years and stands as one of the largest in Africa (World Bank, 2023). Despite its achievements, Nigeria still faces numerous challenges hindering its full potential for growth and development. The development of any economy anchors greatly on the sustainability of its social, political and economic policies and programs that are result oriented (Mensah and Casadevall, 2019). The concept of Sustainable Development, popularized by the Brundtland Commission’s report in 1987 is believed to have the potential of significantly improving the Nigerian economy if effectively achieved. Sustainable Development emphasizes meeting the needs of the present generation without compromising the ability of future generations to meet their own needs (Mensah and Casadevall, 2019). It also involves achieving a balance between economic growth, social equity, and environmental protection.

Achieving Sustainable Development requires a multi-faceted approach. One critical approach is addressing the issue of gender disparities in economic policies, particularly taxation. Nigeria, like many other nations, grapples with gender disparities across various sectors (OXFAM, 2017) and the tax system is not an exception. Taxation is not just a financial matter, it’s a social and economic force that shapes the very fabric of a society. Although efforts have been made to reposition the Nigerian tax system, however, there are still the existence of contending issues such as gender disparity which requires immediate attention (Edori et al., 2017). While women and men are typically taxed under the same rule, the structure and administration of the tax system can have differential impacts on women compared to men (Grown et al., 2022). Women continue to face significant barriers, unequal tax burdens and limited access to economic opportunities. Gender inclusive taxation does not only promote economic equity but also foster sustainable development.

The apparent gender disparity in the Nigerian labor market has also contributed to the exacerbation of these biases in taxation. According to data from Statista (Dec. 2023), the employed male population in Nigeria is estimated to be almost 40 million, while for females, it is around 31.3 million. If Nigeria will make significant progress in achieving sustainable development, biases in tax policies must be eradicated and systems must be put in place to foster a more equitable taxation that can engender economic growth.

THE CURRENT TAX LANDSCAPE IN NIGERIA

The tax landscape in Nigeria is complex and dynamic, reflecting the country’s diverse economic activities, administrative challenges, and socio-economic considerations (Edori et al., 2017). Taxation serves as a vital tool for generating government revenue and financing public services and infrastructure. It involves the imposition of charges or levies on individuals, businesses, or other entities, known as taxpayers, by a governmental authority. Taxation policies and laws are the set of rules and regulations that govern how individuals and entities are taxed within a particular jurisdiction.

Nigeria’s tax system comprises various types of taxes levied at both federal and state levels, with each tax serving different purposes and impacting various segments of the population differently. The federal government imposes taxes such as Value Added Tax (VAT), Companies Income Tax (CIT), Petroleum Profit Tax (PPT), Capital Gains Tax (CGT), and Customs and Excise Duties. The states in Nigeria also have the authority to impose taxes, including Personal Income Tax (PIT), Land Use Charge, and Consumption Taxes. Local governments primarily collect taxes on market stalls, motor parks, and other local activities.

Meanwhile, Nigeria’s tax system has been criticized for its regressive nature and lack of consideration for gender dynamics. Nigeria does not have explicit gender-based tax policies and so the tax policies are not gender neutral. They often fail to address the specific needs and challenges faced by women, perpetuating existing disparities and hindering inclusive economic growth. Some key factors contributing to gender bias within the Nigeria’s tax system include but not limited to;

• Value-Added Tax (VAT): VAT is an indirect tax applied uniformly regardless of income level. Since women tend to spend more of their income on essential goods and services, they may bear a higher burden of VAT than men. This regressive nature of VAT can disproportionately affect low-income women and exacerbate gender-based economic disparities (Africa and Joel, 2023).

• Double Taxation for Entrepreneurial Women: Women involved in entrepreneurship like their men counterpart often face multiple taxation. They are subjected to various forms of taxes by all levels of government, impacting the overall profitability of their ventures.

• Gendered Labour Market and Income Inequality: Gender disparities in the labour market can also indirectly contribute to gender bias in taxation. According to the Global Gender Report, 2022, women often face wage gaps and are more likely to be employed in low-paying sectors or informal jobs and most cases earn less than their male counterparts. Progressive income taxation systems may not fully address these disparities. Thus, lower incomes and economic vulnerability can limit their ability to fulfil tax obligations and hinder their access to benefits provided through taxation (Africa and Joel, 2023).

• Lack of Awareness and Education: Limited awareness and understanding of tax laws and regulations is a significant challenge. Women are not fully informed about available deductions, exemptions, or benefits, leading to missed opportunities for tax optimization.

• Limited Representation in Decision-Making: Women are often underrepresented in decision-making bodies related to tax policy formulation and implementation. This can result in policies that do not fully address the needs and concerns of women, perpetuating gender bias.

• Access to Financial Resources: Women in Nigeria may face greater challenges in accessing financial resources, such as loans or credit. This can limit their ability to invest or engage in business activities, which in turn affects their tax liability.

• Social Norms and Cultural Factors: Traditional gender roles and cultural norms may restrict women’s economic participation or limit their control over financial decisions. This can influence their ability to engage with the formal economy and thus their exposure to taxation.

GLOBAL POSITIONS ON GENDER INCLUSIVE TAXATION

Several international conventions, protocols, and global positions advocate for gender-inclusive taxation and aim to address gender disparities within tax systems. Some of these include:

• Convention on the Elimination of All Forms of Discrimination against Women (CEDAW): CEDAW, adopted by the United Nations General Assembly in 1979, is often referred to as an international bill of rights for women. It calls on countries to take measures to eliminate discrimination against women in all areas of life, including taxation.

• Beijing Declaration and Platform for Action: Adopted at the Fourth World Conference on Women in 1995, the Beijing Declaration and Platform for Action emphasizes the importance of integrating a gender perspective into all policies and programs, including those related to economic and social development, which encompasses taxation.

• United Nations Sustainable Development Goals (SDGs): The SDGs include several goals that are directly relevant to gender-inclusive taxation, such as Goal 5: “Achieve gender equality and empower all women and girls,” and Goal 10: “Reduce inequality within and among countries.” These goals provide a framework for countries to work towards gender equality, including within taxation systems.

• OECD Gender Initiative: The Organisation for Economic Co-operation and Development (OECD) has developed a Gender Initiative that aims to mainstream gender considerations across its work, including in tax policy and administration. This includes research, policy analysis, and recommendations to promote gender equality within tax systems.

• UN Women’s Empowerment Principles (WEPs): The WEPs provide guidance to businesses on promoting gender equality and women’s empowerment in the workplace, marketplace, and community. While not specifically focused on taxation, adherence to these principles can help ensure that tax policies and practices do not exacerbate gender inequalities.

• International Labour Organization (ILO) Conventions: Several ILO conventions address gender equality and non-discrimination in employment, which can indirectly impact taxation policies and practices by promoting women’s access to decent work and equal treatment in the labour market.

CASE STUDIES

Several countries have implemented innovative approaches to ensure that their tax policies consider gender dimensions and mitigate the gender biases inherent in traditional tax systems. Here are examples of international best practices and case studies of gender-inclusive tax policies from different countries:

1. Sweden is renowned for its progressive tax policies aimed at promoting gender equality. One notable initiative is the tax deduction for household services, known as the “RUT deduction”. This deduction allows individuals to claim a tax break for hiring domestic services such as cleaning, childcare, and eldercare. By making these services more affordable, the RUT deduction aims to reduce the burden of unpaid care work, which majorly falls on women, and facilitate women’s participation in the labour market.

2. Canada has implemented various measures to promote gender equality through its tax system. An example is the introduction of the Canada Child Benefit (CCB), a tax-free monthly payment to eligible families with children. The CCB is designed to provide targeted support to low and middle-income families, with higher benefits for low-income families. By providing financial assistance directly to families, the CCB helps reduce child poverty rates and support women’s workforce participation by alleviating the cost of childcare (Jinyan and Jacklyn, 2018).

3. Argentina implemented a gender-responsive tax policy known as the “Pink Tax” law, which aims to address gender-based price discrimination. Under this law, products marketed specifically to women, such as personal care products and clothing, are subject to lower value-added tax (VAT) rates than similar products marketed to men. The Pink Tax law seeks to combat the gender price gap and promote affordability and accessibility for essential goods and services for women.

4. Rwanda has integrated gender considerations into its tax policies as part of its broader commitment to gender equality and women’s empowerment (UNDP RWANDA, 2022). A notable initiative is the tax exemption for women-owned businesses. Women entrepreneurs in Rwanda are eligible for tax breaks and incentives to support their business ventures, including reduced corporate income tax rates and exemptions from certain taxes. These measures aim to promote women’s economic empowerment, entrepreneurship, and participation in the formal economy.

STRATEGIES FOR ADDRESSING GENDER BIASES IN TAX LAWS AND POLICIES IN NIGERIA

Addressing biases in tax laws and policies in Nigeria requires a comprehensive and strategic approach. Some of these approaches include:

Conducting Gender Impact Assessments: The government, CSOs, and all the stakeholders involved must regularly conduct gender impact assessments of existing and proposed tax laws to identify and rectify any discriminatory provisions. This includes analyzing the differential impact on men and women.

Inclusion of Gender Perspectives in Policy Formulation: There must be inclusion of gender perspectives in the development and reformulation of tax policies with consideration of the unique economic activities and responsibilities of different genders.

Zero-Rating or Exempting Essential Goods and Services: Consider zero-rating or exempting certain goods and services that are essential to women or have a disproportionate impact on women, such as healthcare and sanitary products.

Promotion of Gender Diversity in Tax Administration: The active participation of women in tax administration must be encouraged at all levels. This includes training programs, mentorship initiatives, and creating an inclusive work environment.

Conduct of Gender Sensitization Training for Tax Officials: Training programs for tax officials must be done to enhance their awareness and understanding of gender-related issues. This can contribute to fair and unbiased decision-making in tax administration

Ensuring Equitable Treatment in Employment Taxation: Evaluate the tax treatment of benefits related to family responsibilities, such as parental leave and childcare support, to ensure they do not inadvertently discriminate against any gender.

Making Gender-Responsive Tax Policies: Developing tax policies considering the differential impact on women and men is crucial. This includes assessing the potential gender implications of tax measures and ensuring that they do not disproportionately burden women. It may involve targeted exemptions, deductions, or incentives that promote

IMPLICATIONS OF GENDER INCLUSIVE TAXATION ON SUSTAINABLE DEVELOPMENT

Gender-inclusive taxation refers to tax policies and structures that consider the differential impact of taxes on men and women. It aims to promote gender equality by addressing the specific needs and vulnerabilities of women while ensuring equitable distribution of the tax burden. Incorporating gender perspectives into taxation can yield several benefits for sustainable development:

1. Economic Empowerment: Gender-inclusive tax policies can enhance women’s economic empowerment by reducing barriers to participation in the formal economy. This can be achieved through tax incentives for women entrepreneurs, access to credit, and support for female-owned businesses.

2. Poverty Reduction: Women are disproportionately affected by poverty in Nigeria. Gender-inclusive taxation can help alleviate poverty by redistributing wealth and resources more equitably, thereby lifting women out of poverty and improving their standard of living.

3. Economic Empowerment of Women: By addressing gender biases within taxation systems, women can be economically empowered. When women have equal access to economic opportunities and resources, they can contribute more effectively to sustainable development through increased productivity, entrepreneurship, and investment in education and health for themselves and their families.

4. Reduced Gender Inequality: Gender-inclusive taxation policies can help reduce gender disparities in income, wealth, and economic opportunities. This contributes to achieving Sustainable Development Goal (SDG) 5 on gender equality and supports broader efforts to reduce inequality (SDG 10) by ensuring that women have equal access to resources and opportunities to participate in and benefit from economic development.

5. Improved Social Services and Infrastructure: Increased revenue from gender-inclusive taxation can be used to finance social services such as education, healthcare, and childcare, which are crucial for advancing gender equality and promoting sustainable development. Access to quality education and healthcare can empower women, improve their well-being, and enhance their capacity to participate in the economy and society.

6. Promotion of Women’s Rights: Gender-inclusive taxation policies can contribute to advancing women’s rights by recognizing and addressing the specific needs and challenges faced by women in taxation systems. This includes addressing discriminatory practices, ensuring equal treatment under the law, and promoting women’s participation and representation in decision-making processes related to taxation and public finance.

7. Environmental Sustainability: Gender-inclusive taxation can also support environmental sustainability by promoting more equitable and environmentally-friendly economic activities. For example, tax incentives or subsidies targeted at women entrepreneurs or businesses that prioritize sustainability can help foster green growth and mitigate the negative impacts of climate change.

8. Social Cohesion and Stability: Addressing gender disparities in taxation can contribute to social cohesion and stability by reducing economic inequalities and promoting a more inclusive and equitable society. This, in turn, can support sustainable development by fostering social trust, cohesion, and cooperation, which are essential for achieving long-term prosperity and well-being for all members of society

9. Enhanced Economic Growth: Gender equality is closely linked to economic growth and development. By harnessing the full potential of women in the economy, Nigeria can achieve higher levels of productivity, innovation, and competitiveness, driving sustainable economic growth in the long run.

RECOMMENDATIONS

To promote gender-inclusive taxation and its positive impact on sustainable development, governments and policymakers can consider implementing the following recommendations:

• Conduct Gender-Responsive Tax Policy Analysis: Conduct comprehensive gender analysis of existing tax policies and their impact on men and women. This analysis should assess how different tax measures affect gender equality, economic empowerment, and sustainable development outcomes.

• Promote Gender Mainstreaming in Tax Policy Development: Integrate gender considerations into the design, implementation, and evaluation of tax policies and reforms. This includes ensuring that gender experts are involved in tax policy development processes and that gender impact assessments are conducted prior to the implementation of new tax measures.

• Address Gender Bias in Tax Legislation and Administration: Review tax laws and regulations to identify and eliminate discriminatory provisions that may perpetuate gender inequalities. This includes addressing biases in areas such as income taxation, property taxation, and value-added taxation.

• Implement Gender-Responsive Tax Incentives and Exemptions: Design tax incentives and exemptions that target women entrepreneurs, small businesses, and industries that employ a significant number of women. These incentives can encourage women’s economic participation, investment, and innovation while promoting sustainable development objectives.

• Enhance Tax Compliance and Enforcement Strategies: Develop targeted strategies to improve tax compliance among women, particularly those in the informal sector. This may involve providing tailored information, education, and support services to help women understand their tax obligations and access available benefits and exemptions.

• Invest in Gender-Disaggregated Data Collection and Research: Strengthen data collection systems to collect gender-disaggregated data on taxation, economic participation, and outcomes. This data can inform evidence-based policymaking, monitor progress towards gender equality goals, and identify areas for further intervention.

• Promote Women’s Economic Empowerment and Financial Inclusion: Implement policies and programs to enhance women’s access to financial resources, including credit, savings, and insurance. This can include measures to address barriers such as limited access to collateral, discriminatory lending practices, and lack of financial literacy.

• Foster Women’s Participation in Decision-Making Processes: Ensure meaningful participation of women in decision-making processes related to tax policy formulation, implementation, and evaluation. This includes promoting women’s representation in tax authorities, advisory bodies, and public finance management institutions.

• Raise Awareness and Build Capacity on Gender and Taxation: Raise awareness among policymakers, tax officials, civil society organizations, and the general public about the importance of gender-inclusive taxation for sustainable development. Provide training and capacity-building programs on gender-responsive tax policy analysis and implementation.

• Strengthen International Cooperation and Knowledge Sharing: Foster international cooperation and knowledge sharing on gender-inclusive taxation by exchanging best practices, lessons learned, and innovative approaches among countries and relevant stakeholders.

CONCLUSION

Achieving sustainable development in Nigeria requires a concerted effort to address gender disparities through inclusive economic policies, including taxation. Nigeria’s tax system has the potential to contribute significantly to revenue generation and economic development, addressing its weaknesses, such as low compliance, complexity, and inequitable distributional effects, is crucial. Moreover, ensuring that tax policies are gender-sensitive and do not exacerbate inequalities among different segments of the population, particularly women, is essential for promoting inclusive growth and sustainable development. Gender-inclusive taxation can promote economic empowerment, reduce poverty, and enhance overall development outcomes.

Thank you all for listening

God Bless the Federal Republic of Nigeria!!!

Porfessor Fatai A Aremu

Executive Director

Research Enterprise Systems (RES)

Suite D-14, Rukayat Plaza,

Jabi District,

Abuja

07032779635

Aremu.fa@res.org.ng/taifaother@gmail.com