Our taxation system is unfair to women; it's time to rethink it

Kenyan Citizens demonstrate and Protest against over Taxation bill along Nairobi streets. [File, Standard]

The taxation framework in Kenya, while seemingly neutral on the surface, affects men and women differently, often placing a disproportionate burden on women, especially those in low-income and informal sectors. Tackling this gender inequity within the tax system is key to achieving fiscal justice. A 2022 World Bank report, ‘Unrealised potential: The high cost in earnings’ estimates that achieving gender equality could increase global human capital by 20 per cent and global total wealth by 14 per cent. This imperative speaks on the urgent need to anchor inclusive taxation in Kenya’s tax policy regime.

Historically, taxation in Kenya has overlooked the unique issues women face. For instance, women often take more unpaid care work than men. Taking care of children, the elderly, and indisposed family members perpetuates income inequality by limiting the time they spend on paid work, education, and other economic activities. It also affects the type and quality of the productive work they can pursue. Dependent tax credits and deductions could be a progressive step toward enhancing gender equity, especially if designed to specifically target women who face this unique situation.

The heavy reliance on direct taxes such as VAT as a source of revenue for the government further burdens women unfairly. As the primary caregivers in most Kenyan households, they are bound to spend a significant amount of their income on taxable goods and services such as food, water, fuel, and healthcare. The situation is made worse if these households are women-led. Indeed, global studies have shown that globally, women earn 34 per cent less than men. A more gender-sensitive approach would involve lowering VAT rates on essential goods and services that are primarily consumed by women and their families.

Accessing financial resources is another area where women are affected disproportionately. A 2022 Kenya FinAccess Household Survey revealed a 4 per cent gap in financial access between men and women. For this reason, women-owned businesses are likely to wind up faster and more than those owned by men. Women therefore lag behind their male counterparts in growing their income, leading to unequal distribution of capital income. Differentiated gendered taxation of labour and capital income therefore exacerbates economic inequality.

In Kenya, for example, the capital gains tax rate is 15 per cent while labour income is subject to progressive tax rates with the highest tax band at 35 per cent. Whereas there is no consensus on the optimal balance between taxing labour and capital income, progressive taxation across all income types is crucial for a fair tax system. The IMF, vide its April 2024 report, ‘Tax and expenditure policy for gender equality’ avers that in 2022, the number of countries that have adopted gender progressive tax system increased from 4 to 12 globally. In Africa, South Africa moved towards making the system nationally neutral. Such imperatives, if adopted in Kenya, can promote gender progressive tax and enhance fiscal justice at the national level.

At the sub-national level, county governments play a critical role in service delivery but often fail to consider the gendered impact of their revenue-raising policies or fully adopt gender-responsive budget guidelines to promote fiscal justice. Looking at market fees as a common source of revenue for the devolved units, county governments often target small traders, most of whom are women who contribute approximately 53 per cent of the labour force in this sector.

While acknowledging the importance of these fees as a source of income for county governments, they can equally become barriers to economic participation for women especially when the rates are set too high as observed in the KIPPRA Policy Brief 12/2022-2023. A gender-sensitive approach would ensure that such fees are fair and progressive, and take into account the limited earning capacity of women in these sectors.

An inclusive tax system is fundamental to achieving fiscal justice in Kenya. By adopting gender-progressive taxation policies, reforming the tax treatment of the informal sector, and promoting gender equity at both the national and sub-national levels, Kenya can ensure its tax system works for all citizens.

National Coordinator National Taxpayers Association