MLP in gender equality seminar - The impact of tax systems on gender equality, June 2017, Sweden

In June 2017 Sweden hosted a mutual learning seminar on the impact of tax systems on gender equality and presented its policy on full individual taxation, which was first introduced in 1971. The reforms focused on removing disincentives for secondary earners, which prevented women from accessing the labour market or working full-time.

The mutual learning seminar, held in Stockholm on 13-14 June 2017, examined and discussed Sweden’s policy on individual taxation and its impact on gender equality. This topic is highly relevant, as the European Commission has recently published a new initiative, the Work-Life Balance Package, which combines legal and policy measures to support work-life balance. The package includes a component on removing fiscal disincentives for secondary earners which prevents women from accessing the labour market or working full-time.

Today, Sweden has a fully individualised tax system. The seminar primarily focused on the measures contained in the Swedish individual taxation policy introduced from 1971 onwards, as well as on the wider context of the reform, transitional arrangements and complementary social policies. Apart from gender equality principles, the rationale behind the reforms was the need to increase the labour supply to achieve economic growth. Prior to the reform, there had been a family-based taxation system, with more favourable tax rates for married persons and a transferable basic tax deduction. The reforms introduced individual taxation on earned income with a common tax schedule regardless of marital status. Compensatory transitional arrangements included a spouses’ tax reduction where the second household member had no or low earnings, although this was fixed at a nominal rate and was phased out twenty years later. In this way, fiscal disincentives for married women to enter the labour market or work more hours were removed. The reforms resulted in a reduction of tax rates particularly for women who were low income earners and for women married to men with high incomes. Over time, women’s employment rates have increased from 60% when the reforms were introduced to 79% in 2016. Evidently, this employment growth was also a consequence of other social policies, in particular the provision of quality public child care and the growth of the public sector, providing new job opportunities. However, the tax reforms were clearly a contributing factor.

The discussion among participants focussed on how different elements of the prevailing tax systems as well as accompanying measures can impact gender equality. It was pointed out that profound changes in the tax system take time and require long-term political commitment. There was an agreement that a holistic approach was needed, going beyond mere tax reforms. High-quality, accessible, and affordable child care, as well as parental leave and flexible working arrangements, were cited as essential in order to facilitate women’s access to employment and increase their working hours. It was also pointed out that while the gender employment gap is not a main issue of concern in most transition countries, it is the rather low salary levels that make dual-earner households a financial necessity and have an impact on fertility rates. Participants considered possible actions and ideas, which could be applied in their own country context in order to achieve gender-neutral tax and benefits systems making work financially advantageous for both earners in a household and leading to a more equal sharing of housework and care responsibilities.