World Bank and IMF´s gender analysis of VAT falls short

22 September 2021

An unidentified woman buying in a typical grocery shop on Jan 27, 2004 in Ilakaka, Madagascar.

An unidentified woman buying in a typical grocery shop in Madagascar. Credit: Pierre-Yves Babelon/Shutterstock

Civil society organisations (CSOs) have long called on the World Bank and the IMF to ensure that they consider the gendered impacts of their tax policy proposals, which have the potential to exacerbate gender inequality. One particular concern for CSOs is the disproportional impact that value-added tax (VAT) increases have on women (see Briefing The IMF, gender equality and VAT).

Both the IMF and the World Bank appear to be taking small steps towards considering the impact of VAT on women. For example, a joint World Bank/IMF/OECD blog in June noted the impacts of certain types of VAT increases on women. It highlighted that, “The broad-based nature of VATs may raise the price of services, including those that substitute for household services. This may create a disincentive for women to work.” Additionally, within the IMF’s tax policy assessment framework (TPAF), a new box has been included which asks, “Does the VAT impose a gender bias?”

While a positive advance in the Bank and Fund’s efforts to lay out a gendered analysis of their policy prescriptions and conditions, these initiatives do not fully engage with the recommendations and evidence provided by women’s rights groups and UN Women. In the above mentioned TPAF, the IMF notes that, “Whether VAT is biased for or against women…depends on various aspects, including the different consumption patterns of men and women as well as the choice of goods and services covered by the VAT. Assessing this can be complicated and, even conceptually, not straightforward.” This however seems to ignore substantial evidence gathered by CSOs and academics demonstrating how VAT disproportionately affects women.

International financial institutions continue to ignore or deny the regressive effects of consumption taxes like the VAT on those with low incomes.Kathleen Lahey, Queens University, Canada.

Additionally, the Bank and Fund’s country-level prescriptions fail to take into account the above-mentioned concerns as both continue to promote the use of regressive taxes. A World Bank Development Policy Financing loan to Nigeria in 2019 aimed at supporting the government’s fiscal consolidation efforts to reduce its deficit, which included prior actions such as the increase of VAT and income tax revenues, demonstrates the trend. It did not include an analysis of the impact of measures such as the introduction of an 8 per cent VAT rate on petroleum products on women (see Briefing Learning lessons from the Covid-19 pandemic). “International financial institutions continue to ignore or deny the regressive effects of consumption taxes like the VAT on those with low incomes. For example, contemporary research now focuses on the claim that the VAT is actually progressive when the informal sector is included in distributional impact analysis,” noted Kathleen Lahey, of Queens University in Canada.

IMF and World Bank conditionalities often force governments to increase regressive taxes, such as VAT, which CSOs and academics have shown impacts heavily on the poor and especially women. CSOs have long raised concerns that both institutions rely too heavily on regressive taxes, without systematically measuring their distributional and gendered impacts (see Dispatch Springs 2019, Annuals 2017). This trend has also been reflected in IMF’s lending programmes agreed in the context of Covid-19. Research by Belgium-based CSO Eurodad published in October 2020 found that of 59 country programmes analysed, 39 made commitments to the IMF to increase the share of indirect taxes, particularly VAT, in total government revenues (see Observer Winter 2020).