Gender-Blind Fiscal System Overburdens Women: Study Finds

Jul 27 , 2025. By RUTH BERHANU ( FORTUNE STAFF WRITER )

A groundbreaking study has uncovered deeply entrenched gender disparities in the tax system, revealing how ostensibly neutral fiscal policies disproportionately burden women.

Contrary to the common assumption of neutrality, the tax regime imposes heavier obligations on women taxpayers, who tend to earn less and operate smaller and lower-margin businesses. Central to the imbalance is the presumptive tax regime, which targets small and micro-enterprises through turnover-based assessments. The methodology, unchanged since the 2017 Income Tax Regulation, overestimates profitability, particularly in sectors with high female participation, such as food vending, tailoring, and informal retail.

Presented by Kiflu Gedefa (PhD), an economist, at an international conference of the Ethiopian Economics Association, held at its headquarters near the CMC residential complex, the research draws on national datasets, fiscal incidence models, and granular expenditure surveys to expose systemic inequities embedded within income, business, and consumption tax frameworks. Kiflu's study found the consequences are tangible.

Women-owned businesses pay 8.4pc more in individual taxes and four percent more at the firm level than their male counterparts, despite generating less revenue and holding fewer assets. On average, women pay 37,820 Br annually in taxes, compared to 34,980 Br paid by men. Turnover tax alone reveals a 24.6pc disparity.

Yet, women remain underrepresented in formal tax records. In 2025, women accounted for only 2.1pc of Category C taxpayers, those under presumptive taxation. Out of 407,428 Category C taxpayers in Addis Abeba, a mere 8,612 were women.

According to experts, the crux of the issue lies in the design of policies. They say that the federal tax laws, while gender-neutral in text, are functionally blind to the structural disadvantages women face, such as lower earnings, informal employment, limited capital, and weaker institutional access.

Officials acknowledge these issues but note substantial data limitations as a significant hurdle.

"We must stop confusing formal neutrality with actual fairness." Kiflu Gedefa (PhD) Economist

"We collect data from all categories, but we don't separate them by gender," admitted Sewenet Ayele, communications head at the Addis Abeba Revenue Bureau.

The Bureau still uses the 2017 Income Tax Regulation, assessing presumptive taxes based on a turnover schedule.

According to the regulation, "Category C pays a presumptive business tax from a turnover-based schedule that should be revised at least every three years."

However, reforms appear imminent. A new federal income tax regulation in 2025 has removed estimation methods previously applied to Category C. Tax officers are undergoing training to adapt to these changes.

According to Tsehay Befikadu, director of Women & Children's Affairs at the Addis Abeba Revenue Bureau, the Bureau conducts regular outreach, offering "business consultancy and tax training for women under Category C every month." However, she admitted the collected data remains general.

"We don't yet have any initiative to track how much tax women pay versus men," she said.

An outdated income tax bracket system has compounded women's tax burdens. Low-income earners, often women, face "bracket creep," which occurs when higher taxes result from nominal wage increases that are not matched by updated tax thresholds. According to a 2025 World Bank fiscal review, men disproportionately benefit from the progressive tax framework, while inflation and underemployment intensify women's financial vulnerability.

With 63pc of women in informal employment compared to only 38pc in formal jobs, many women encounter a tax system insensitive to income fluctuations and lacking protective mechanisms.

Estimates from presumptive tax data show that women pay roughly 1.03 billion Br more in taxes annually than men, despite operating smaller businesses. Women’s total tax contributions were approximately 4.83 billion Br.

Consumption taxes further exacerbate the disparities. Female-headed households spend a larger portion of their income on value-added tax (VAT) and excise taxes. Before recent tax reforms, middle-income female-headed households paid up to 5.3pc of their income in VAT, compared to 4.7pc among male-headed households. Recent adjustments have slightly narrowed this gap, but the differential persists because women more frequently purchase taxed essentials, such as feminine hygiene products, baby formula, cooking oil, salt, and household cleaning supplies.

The expansion of excise taxes on these items further burdens women financially. A 2022 World Bank analysis disclosed the poverty-inducing nature of indirect taxes for female-headed households, resulting from their lower disposable incomes and distinct spending patterns.

Financial exclusion also perpetuates tax vulnerabilities among women. According to the National Bank of Ethiopia's (NBE) 2025 Financial Inclusion Scorecard, only one in 30 banks provides transformative financial services to women, despite commitments under the second edition of the National Financial Inclusion Strategy. Women are underbanked and underserved, lacking access to accounts, credit, insurance, and digital banking. They struggle to access formal tax relief, register their businesses, or file taxes electronically, which reinforces their tax-related hardships and limits their economic advancement.

Institutional coordination gaps further complicate addressing these inequities. Although joint initiatives between revenue offices and social ministries exist, accurately tracking women's tax contributions remains elusive.

Zekariyas Desalegn, a gender-based violence prevention expert at the Ministry of Women & Social Affairs, noted that despite joint training and data collection efforts, "tracking women's financial contribution remains a gap."

To tackle structural inequalities, Kiflu's study urged immediate reforms, including adjusting tax brackets for inflation to shield low-income earners, particularly women, from bracket creep. It recommends revising presumptive tax models with updated gender-specific data and implementing temporary tax relief measures for women-led microenterprises. The removal of VAT and excise taxes on essential goods, along with increased access to gender-sensitive financial services, is proposed to reduce persistent inequities.

While policymakers have initiated discussions, advocates insist that data alone cannot resolve the issues. They argue for robust administrative reforms and a political commitment to thoroughly incorporate gender considerations into fiscal policies.

"We must stop confusing formal neutrality with actual fairness," said Kiflu.

According to him, tax systems imposing higher burdens on women reinforce existing inequalities.

For Fitsum Atnafework, founder of Self Reconciliation Event Organiser, grassroots financial literacy and local-language tax education are essential to achieving fairness.

"Education is the first step to fairness," she said. "If women do not understand the system, they cannot trust it."

She advocates for mentoring programs, simplified business registration, mobile tax services, and the establishment of a "Women's Small Business Tax Credit" to promote business formalisation and growth. Her recommendations include grace periods, customised presumptive models, flexible payment plans, and subsidised advisory services for emerging women-owned businesses.

PUBLISHED ON Jul 27,2025 [ VOL 26 , NO 1317]