Taxes are often seen as a tool for economic development and redistribution, yet the system itself can unintentionally perpetuate inequality. Among the most overlooked disparities is the “gender tax gap,” which refers to how tax policies and practices often affect men and women differently. Globally, many women, particularly those in informal and lower-income sectors, bear a disproportionate tax burden or are excluded from the system altogether.
The OECD’s Tax Administration 2024 report offers critical insights into addressing this issue, showcasing how several countries have adopted gender-responsive approaches to taxation. As Indonesia strives for a fairer and more inclusive tax system, lessons from these global practices could provide valuable guidance for the Directorate General of Taxes (DGT).
Why the Gender Tax Gap Matters
Indonesia faces significant gender disparities in labor force participation and economic empowerment. According to World Bank data, only 53.4% of Indonesian women participate in the labor market compared to 82.5% of men. Many women work in informal sectors, which make up 57.3% of total employment (ILO, 2021). These informal workers, who often earn less than their formal counterparts, are largely invisible to the tax system and excluded from its benefits.
In addition, women disproportionately bear caregiving responsibilities, which can limit their earning potential and tax contributions. Consumption taxes like value-added tax (VAT) add another layer of inequity, as women tend to spend more on household essentials, shouldering a larger share of these indirect taxes.
The gender tax gap is not merely a theoretical concern; it reflects real economic vulnerabilities that undermine women’s financial security and Indonesia’s broader economic goals.
Adding Gender to Tax Gap Analysis
Traditionally, tax gap analysis focuses on the difference between taxes owed and taxes collected. Incorporating a gender perspective into this analysis can reveal critical insights into systemic disparities. For example, are women-owned businesses less compliant due to structural barriers? Do indirect taxes like VAT disproportionately affect women?
Some OECD countries, such as Canada, have implemented gender-based analysis frameworks to assess these questions. Canada’s Gender-Based Analysis Plus (GBA+) framework evaluates the impact of tax policies on various demographics, considering factors like gender, age, and income. For Indonesia, adopting a similar framework could ensure that tax reforms address the unique challenges faced by women.
What Indonesia Can Learn from OECD Practices
In the United Kingdom, the Treasury utilizes microdata to assess how tax policies affect men and women differently. For example, it analyzes the gender-specific impacts of tax credits and deductions. This detailed approach has allowed the UK to identify inequities and implement targeted solutions. Similarly, in Indonesia, DGT could benefit from collecting gender-disaggregated data to uncover patterns of non-compliance, exclusion, or disproportionate burdens. By understanding how tax policies affect women entrepreneurs in the informal sector, the DGT could design more accessible filing systems or offer tailored tax incentives.
In Brazil, the Sinter program integrates geospatial and fiscal data to enhance property ownership transparency, a vital initiative for women who often struggle to secure land rights. For Indonesia, where property and land tax benefits remain unequally distributed, adopting a similar strategy could help ensure that women are included in property tax reforms.
In Korea, the National Tax Service has successfully aligned its tax and welfare systems to support low-income households, many of which are led by women. Programs such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) directly address the financial challenges women face. Indonesia could explore similar policies, integrating tax and welfare systems to provide targeted support to vulnerable groups, including single mothers.
Building Awareness and Trust
Addressing the gender tax gap also requires building trust and awareness among women taxpayers. Many women, particularly those in informal sectors, remain unaware of their tax rights and obligations or view the system as overly complex and inaccessible.
The DGT could partner with women’s organizations and community groups to design outreach programs that demystify taxation. Campaigns highlighting the benefits of tax compliance—such as access to social protections—could encourage greater participation. Additionally, showcasing success stories of women entrepreneurs who have formalized their businesses can serve as powerful motivators.
Policy Recommendations for DGT
To address the gender tax gap effectively, Indonesia’s DGT should prioritize data-driven reforms by collecting and analyzing gender-disaggregated data. This information can uncover disparities in tax compliance and benefits utilization, serving as a foundation for evidence-based policy design that ensures greater equity within the tax system.
Introducing targeted incentives would further alleviate economic pressures on women. Policies such as tax deductions or credits for caregiving expenses could acknowledge the disproportionate burden of unpaid labor often borne by women. Additionally, simplifying tax filing processes for women entrepreneurs, particularly those operating in informal sectors, would encourage greater participation in the formal economy.
The development of inclusive digital platforms is another critical step. Mobile-friendly and multilingual tools would improve accessibility for women across diverse regions, while integrating tax payment systems with widely used mobile money platforms could reduce barriers for women in informal economies.
Efforts to close the gender tax gap must also involve raising public awareness. Collaborations with women’s organizations to deliver tailored tax education programs could demystify tax processes, while campaigns that emphasize the tangible benefits of compliance—such as access to social protections—can build trust and encourage broader engagement.
Finally, aligning tax policies with social welfare programs offers a holistic approach to addressing economic vulnerabilities. Integrating these systems could provide targeted support for low-income women, ensuring that tax policies not only generate revenue but also contribute to social equity and empowerment.
The Way Forward
Tax systems are more than fiscal instruments, rather, they are reflections of a nation’s values and priorities. Addressing the gender tax gap is not just a matter of economic efficiency; it is a moral imperative for equity and inclusion.
The insights from the OECD offer a valuable roadmap. In a rapidly evolving world, ensuring that no one is left behind—regardless of gender—should be at the heart of Indonesia’s tax policy agenda.
The time to act is now.
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Editor: Moch Aldy MA