Gender inequality in the VAT system and wider tax sphere
Does the VAT burden unfairly fall more heavily on women than men? There is lots of proof it does resulting from gender differences in consumption expenditures. For example, Akram- Lodhi and Van Staveren study in Vietnam: “the VAT structure fails to recognise gender-based differences in input cost structures” as well as in VAT registration. Cumulatively, there can be little doubt that the VAT system demonstrates gender bias .
What is the EU and non-EU countries doing about it? Lots, including EU Parliament hearings last week on VAT and broader tax issues.
EU Parliament debates VAT and wider income tax issues with gender
During the European Parliament’s FISC Subcommittee held a public hearing on 14 January 2025 to discuss the impact of taxation on gender equality in the EU. Tax Professor Åsa Gunnarsson from Umeå University highlighted that redistributive tax policies often prioritize economic growth over progressivity, indirectly reinforcing gender inequality. Manal Corwin, Director of the OECD Centre for Tax Policy and Administration, emphasized that while explicit tax provisions harming gender equality have largely been removed, systemic issues persist. For example, higher tax rates for secondary earners—predominantly women—discourage their labor force participation.
Laura Linda Sabbadini, former Director of the Italian National Statistics Institute, pointed out that family-based tax systems and inadequate public service investments often hinder women’s full-time employment. She stressed that investments in care services and paternity leave are more effective than tax reforms alone in addressing gender disparities. Similarly, Ana Xavier from the European Commission’s DG TAXUD advocated reducing tax burdens on secondary earners, noting that 78% of them are women.
Gendered Spending Patterns and VAT
VAT is intended as neutral. However, it can unintentionally contribute to gender inequality due to differing spending patterns between men and women and the economic and caregiving burdens women disproportionately shoulder. Women typically allocate a greater share of their income to essential goods and services like food, healthcare, childcare, and household items, many of which are subject to VAT.
Conversely, luxury goods or items more commonly consumed by men are often taxed similarly or at reduced rates. This disparity results in women, especially those with lower incomes, bearing a heavier relative tax burden. A clear example of this is the “tampon tax,” where menstrual hygiene products have historically been taxed at standard rates, despite being essential for women.
Women are also more affected by VAT rate increases, which are frequently implemented to offset personal income tax reductions. Since men are more likely to benefit from lower income tax rates due to higher average earnings, such policy shifts exacerbate existing inequalities. Additionally, men tend to earn more capital income, such as dividends and stock gains, which are often taxed at lower rates than labor income, further widening the gender gap.
UK, EU, India and others use VAT to rebalance gender bias
Some countries have taken steps to address the gendered impacts of VAT. For instance, the UK, Ireland, and India have eliminated or reduced VAT on menstrual hygiene products, recognizing their essential nature. And the EU has given similar powers to member states. Similarly, reduced VAT rates on childcare and healthcare services can alleviate women’s financial burdens, indirectly promoting gender equality.
The EU has also made strides, updating its VAT directive to allow member states to apply reduced or zero rates on essential goods disproportionately consumed by women. So since April 2022, a revision of the EU VAT Directive introduced greater flexibility for Member States to reduce VAT rates on female sanitary products. This change allowed Member States to lower the VAT rate to as little as 0 %, compared with the previous minimum rate of 5 % (Annex III, paragraph 3).
The European Commission, in collaboration with the Joint Research Centre, uses tools like the EUROMOD tax-benefit simulation model to analyze how indirect tax reforms, including VAT changes, impact income distribution. These efforts aim to identify and mitigate unintended regressive effects on gender equity.
Global and Broader Efforts
Outside the EU, countries like Canada and Australia have exempted essential health products from VAT, while the OECD collaborates with governments worldwide to refine tax policies. These efforts reflect growing recognition of the need to integrate gender considerations into tax systems.
Despite progress, significant challenges remain. Critics argue that eliminating VAT on essential goods provides only partial relief and does not address underlying income inequality or structural biases in tax systems. Broader fiscal reforms—such as adjustments to income tax and targeted subsidies—are needed to complement VAT changes.
