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Tax allowances

Tax allowances are ways of exempting people or companies from paying direct or indirect taxes in certain circumstances. They can be used by governments to incentivise desirable behaviour, achieve social goals or simply to reduce levels of taxation on particular groups of people.

Allowances against income tax tend to be regressive and gender-biased because those with the lowest incomes who do not earn enough to pay income tax are ineligible for them, and higher earners, mostly men, gain more than lower earners from them. For example, tax allowances designed to increase savings go to those who can afford to save, men more than women, so increase gender gaps in income and wealth.

It would almost always be fairer and more efficient for the government to pay directly to achieve its social goals. Doing so is also more transparent, which makes its equality impact easier to assess. Tax allowances may also contain inherent male biases in them, that is, give allowances for behaviour or the ownership of assets that are more likely to be associated with men, such as the use of cars. Even if no such bias exists, tax allowances are likely to be of greater use to men since they have higher incomes.

Complex systems of tax allowances, especially for corporations and richer individuals who can afford expensive tax accountants, give scope for tax avoidance and the creation of a tax avoidance industry, with damaging gender and social effects. Such tax practices are a gendered issue because they reduce the amount of tax paid by the wealthy and by large corporations and thus reduce government revenue. Tax allowances are sometimes seen as more politically acceptable than spending on transfer payments. This works strongly against women’s interests since women are likely to gain more from direct public spending and men from tax allowances.