Taxation & Social Policy Group 12 February 2019 Fran Bennett

1. Taxation & Social Policy Group12 February 2019Fran Bennett Senior Research & Teaching Fellow, Department of Social Policy & Intervention, University of Oxford and member, Women’s Budget Group Taxation and gender issues

2. Outline • Introduction (focus: income tax, not CGT/IHT/VAT etc.) • Independent taxation 30 years on • Transferable tax allowance • High income child benefit charge • Tax and benefit assessment units • Priorities and principles • Policies

3. Introduction • Why is taxation important for gender issues? (from presentation to APPG on responsible taxation, 12 June 2018, Sue Himmelweit, WBG): • tax is important part of government policy, and government has duties in relation to gender (in)equalities (resources, roles, relations) • incidence of taxation can affect relative positions of women / men • services & benefits funded by tax especially important for women • incidence of taxation & services it funds can affect behaviour (gender roles & relations) & so potentially also gender (in)equalities in future • Taxation as contribution, not ‘burden’: cuts are not gender neutral

4. Independent taxation 30 years on • 1990: married woman’s income treated as her own for first time • Pay less tax on own income than if taxed together with husband • Greater incentive to have own income through employment • Privacy & autonomy in tax affairs for first time • But to avoid losses, married couple’s (transferable) allowance (MCA) kept, & continuation of equivalent allowance (APA) for lone parents • However, MCA (& APA) phased out & then abolished (except for older people) in 2000, with all-party support

5. Arguments at time focused on ‘social priorities in taxation’ (CPAG) • Marriage (or civil partnership) does not create need in and of itself • Language about ‘taxing families’/’family friendly tax’ (e.g. Christian Action, Research & Education (CARE) / Tax and the Family) - but: • not families/individuals who are taxed, but income, goods, wealth… • often refers in practice to single-earner couples (married/civil partners), with/without children, with non-earners largely women • i.e. often about increasing support for traditional family • (Labour also considered family unit for income tax (tax credits))

6. Transferable tax allowance (TTA) • 2015 on: partial transfer, of one-tenth of personal tax allowance (PTA), for couples with neither partner paying higher rate tax & one partner not using (all) their PTA • PM: not about money, but about recognising marriage • But many married couples don’t qualify (& civil partners do) • Small step, but in wrong direction • 85% main earners getting TTA at time of introduction were men • Trade-off for 5-7s free school mealsin coalition government? • Low take-up has caused concern amongst those promoting it

7. PM: if your partner doesn’t use all allowance, you can have some of it • I.e. rewards higher earner in a couple for having partner with no / low earnings (Sue Himmelweit, WBG) • Higher earner’s income, & difference in partners’ incomes, enhanced • Already clawback of gains due to universal credit, & TTA risks worsening incentives for ‘2nd earners’ (largely women) in principle – and in practice if extended further • Individuals have aspirations so much higher than wanting to be part of someone else’s taxable capacity

8. High income child benefit tax charge (HICBC) • Child benefit (CB) main way fiscal system now recognises family needs – i.e. higher costs relative to income at whatever income level • Preferable to previous child tax allowances (+ family allowances): paid to mother, not main earner as with CTAs, flat-rate payment • HICBC from 2013, for households with someone getting CB & some-one on ‘adjusted net income’ of £50-60,000/year (austerity cut) • ‘Adjusted net income’: can discount pension payments, charity gifts • Means higher tax rate for some lone parents and couples with children (increasing with number of children)

9. Orchild benefit given up (former recipient loses independent income, and potentially pension rights if CB not claimed?) • Non-compliance? & as with TTA, complicates UK tax system • High marginal rates created, increasing with number of children • Compromises independent taxation (with no guarantee of support) • Imposes additional tax only on better-off people who have children • Perpetuates double standard (benefits vs. tax reliefs/allowances) • Could be argued to compromise rights of children if CB given up

10. Tax and benefit assessment units • Argument often made that income tax is assessed on individuals, but benefits on family unit, and that this is contradictory • Confused: joint assessment only for means-tested benefits/tax credits • But other benefits are individual (& increasingly so – abolition of dependants’ increases & ‘derived’ benefit rights for married people) • ‘Couple penalty’ – not today’s topic, & contested (but universal credit will advantage single earner couples, relative to legacy benefits) • More important now may be ‘independence penalty’? i.e. women’s aspirations for independent income

11. Not threat to, but foundation for, committed coupledom • Buttension with means testing (R. Griffiths, ‘No Love on the Dole: The Influence of the UK Means-tested Welfare System on Partnering and Family Structure’, Journal of Social Policy 46(3): 543-561) • Especially so with single payment arrangement for universal credit? • One partner’s dependence on other not well suited to today’s families • Low Incomes Tax Reform Group (Chartered Institute of Taxation) 2015 report: how couples are treated in ‘tax and related welfare systems’ • Recognises individual, as well as household, may be on low income

12. Priorities and principles • Do look at tax & benefits/services together (but don’t assume relative priority now on tax cuts / cuts to benefits & services is right) • Case for independent tax if anything stronger today (Laurie & Kan) • Also stronger if progressive income tax schedule is favoured • Multiplicity/fluidity of family forms (including LATs) & possible obligations outside current household too (so not all joint inside it?) • & importance of quality of relationship, not family structure in itself • Real issues: why one partner not earning, if so; if tax/benefits system should do anything about this, or not; & if so, how best to do so

13. Support for caring better directed to carer, not partner’s tax • Children should be focus of support through fiscal system • Children are an additional cost, at whatever income level • Child benefit is simple & flexible/neutral on family & employment status, usually paid to mother, & ‘follows child’ • Child benefit should be seen as equivalent to a tax credit to recognise children • If better-off should pay more tax not just those with children

14. Policies • Don’t extend TTA, eg increase for those with (young) children, abolish • Don’t continue to increase PTA – or for parents only (reintroducing child tax allowances - & which parent would get them?) – instead: • Unfreeze child benefit, restore universality, & increase it in real terms • Childcare support via supply not demand side, not via tax exemption • More generous payment for parental leave, with right to return, & certain period reserved for fathers to encourage sharing of caring • Improve carer’s allowance, as in Scotland, for those caring for elderly /disabled/ people (independent income often valued by women)

15. Introduce paid leave from work for carers for elderly/disabled people • Emphasis on non-means-tested benefits, neutral on family status • So focus should not be on single earner versus 2 earner couples (but don’t assume independence – may need ‘red-circling’ for older) • Or on household income as a whole, at one point in time only … • But onbalance of resources within households as well as between them, & on implications for roles and relationships, opportunities & income trajectories for individuals both now and over the life course

16. Some references • https://wbg.org.uk/blog/taxing-families-debate/ - blog by Fran Bennett • https://wbg.org.uk/analysis/2018-wbg-briefing-tax-and-gender/ - briefing for WBG by Sue Himmelweit: tax & gender; & by Fran Bennett & her on transferable tax allowances: https://www.wbg.org.uk/wp-content/uploads/2013/10/WBG-briefing-on-TTAs-final.pdf • https://wbg.org.uk/analysis/2018-wbg-briefing-tax-on-savings-and-investments-gender-issues/ - briefing for Women’s Budget Group by Jonquil Lowe: savings & investments • https://www.tax.org.uk/file/4551/download?token=qq_nCm5_ - Chartered Institute of Taxation analysis of 2017 manifestos • https://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN04392 - House of Commons library briefing on tax, marriage and transferable allowances • De Henau, J., Himmelweit, S. and Santos C. (2009) `Gender equality and taxation: a UK case study', in Grown, C. and Valodia, I. (eds), Taxation and Gender Equity: a Comparative Analysis of Direct and Indirect Taxes in Developing and Developed Countries, IDRC

17. https://www.litrg.org.uk/sites/default/files/CAT%20report%20FINAL.pdf – Couples in the Tax and Related Welfare Systems: A call for greater clarity, Low Incomes Tax Reform Group of Chartered Institute of Taxation, 2015 • https://www.care.org.uk/sites/default/files/The-Case-for-Transferable-Allowances-The-Public-Policy-Benefits-of-Marriage_14-March.pdf - CARE briefing in support of transferable tax allowance & https://www.care.org.uk/news/latest-news/mps-debate-uk%E2%80%99s-anti-family-tax-system – Commons debate • https://www.care.org.uk/news/latest-news/new-report-individualistic-tax-system-crippling-uk-one-earner-families - CARE analysis of tax and family in international context • https://www.taxandthefamily.org/ - Tax and the Family (close links to CARE)