I am a tax law academic. I have worked for governments in the past, consulting with the Department of Finance and, more recently, with governments in Singapore, the U.K., Hong Kong, Australia, and New Zealand, and so on, about the issue—to put it bluntly—of taking women seriously in tax policy.
My position and my comments today are probably a bit more specific than Dr. Good's, as they are simply coming from the tax law perspective, but I promise to make them easy.
As I mentioned, I'm delighted to be here and I'm particularly thrilled that Canada has taken this step to apply a gender analysis to budget measures, as have many other countries. For reasons that will become apparent, I believe such an analysis is key to ensuring that women are not discriminated against in comparison with men in our tax system.
As I mentioned, my starting point is tax law and policy. I'm a tax lawyer, an academic who focuses on tax policy, and my comments today will be about the tax system.
As mentioned, I was given copies of the 2006 and 2007 gender-based budget analyses. Both of these documents go a long way toward recognizing the socio-economic realities of women's lives and how tax measures, especially what we call tax expenditures—and I'll return to that point in a minute—may affect women differently because of those socio-economic realities.
So as the analysis acknowledges, women tend to earn less than men and have considerably less wealth than men. We know, for example, that more women than men are the primary caregivers of children. We know also that single, elderly women over 65 are far more likely to live in poverty than elderly men. We also know, of course, that women are not a monolithic group; for example, aboriginal women and women with disabilities all have incomes well below those of other women.
So why is the tax system so relevant? Well, it's important that we view it not simply as a revenue-raising instrument; in fact, we use the tax system to deliver all manner of subsidies to Canadians.
Let me just give an example to make my point about how we use our tax system as a spending program. I am not talking about collecting tax revenue and then reallocating it to various programs. What I am talking about is how tax breaks that result in forgone revenue by the government are simply taking the place of direct spending programs. For example, in 2007 we spent $780 million on the child care expense deduction, a tax deduction designed to help families with children whose parents work outside the home and need child care for their children.
To put it another way, Canadians paid $780 million dollars less in taxes than they would otherwise have paid, because they were given a tax deduction. That figure represents the tax revenue forgone by the federal government. The tax system in this instance is simply being used to deliver a subsidy intended to partially defray the cost of child care.
Now, the government could have taken that $780 million and built more child care facilities; it could have subsidized existing child care facilities; it could have given every Canadian with a child a subsidy, a direct grant to help cover some of the costs. But the decision was made to deliver the subsidy through the tax system.
I'm not saying the government should have taken any of these steps in particular; those decisions are yours to make as politicians. But when you look at tax breaks such as the child care expense deduction, the first question should be, is the tax system the best tool we have to accomplish this particular policy?
That's the background to my main point, namely, that we have relied over the years more and more on the tax system to deliver sophisticated social and economic programs; and I believe that the gender analysis currently being applied to new budgetary measures also needs to be applied to our current tax rules. That's my basic point. You need to look, as Dr. Good said, at the whole package. It is simply not enough to look at new measures; the current measures, those in existence right now, must also be subject to the same scrutiny.
If you look at the current tax rules through the lens of gender, then all kinds of questions are raised. Let me just give you a couple of simple examples, and the point here is just to let you think a little bit about where it would lead you if you applied a gender-based analysis to some of these rules.
Take, for example, registered retirement savings plans, what we call RRSPs. These were everybody's favourite savings plan until the current budget. Basically the government is saying we want to help people save for their retirement, so we're going to do that by subsidizing that saving. In fact, the tax expenditure for RRSPs is one of the largest annual personal tax expenditures, with a projection of the value of the tax break being over $16 billion for 2008.
Perhaps more importantly, the RRSP was actually designed with women in mind. The idea was that because fewer women than men had access to workplace pension plans, the RRSP would allow them to build up their own personal pensions. That's a laudable policy, but when you look at the RRSP from the perspective of women, women are clearly not getting their fair share of that $16 billion tax break, that expenditure. One problem is, of course, that because women earn less than men, they have less discretionary income to contribute, and we see this when we look at the statistics.
Another issue is that the tax break for contributing to an RRSP is a tax deduction, and a tax deduction is worth more to those with high incomes, those who pay tax at a high tax rate. To give a simple example, if you and I each contribute $10,000 to an RRSP, and I have a low income and pay tax at an average rate of 10%, while you have a higher income and pay tax at an average rate of 40%, I save $1,000 in taxes that I would otherwise have paid, but you save $4,000 in taxes you would otherwise have paid. Put another way, we both make the same contribution, but as the person with the higher income, you get four times the subsidy that I do. Frankly, you actually may need it less, because you have the higher income.
I won't go into all the statistics, but when you look at the tax statistics, you can see that while more women than ever are actually contributing to RRSPs, they're getting significantly less of that $16 billion subsidy than men, in part because they have lower incomes.
Let me give you one more example that I think raises some questions about the fairness of the current tax rule when you look at it from a gender perspective. I'm talking here about what's called the spouse or common-law partner tax credit.
Taxpayers who support a spouse are entitled to a tax credit of just over $1,000 a year, although that credit is reduced once the spouse's income exceeds approximately $700, and eventually it's phased out as the spouse's income increases further. Far more men than women claim the credit, and they tend to be men with high incomes who are supporting their spouses.
When one looks at the measure from the perspective of the spouse--usually the woman--several issues arise.
First, the measure is clearly designed to promote economic dependency in the relationship, and this has led women's groups and others to argue for its repeal, given the adverse impact on women's autonomy. There is a tax cost--that is, the loss of that $1,000 credit--associated with working outside the home, and that is a real disincentive to women who may wish to work in the paid labour force. I can comment on this in the context of income-splitting later on if there are any questions about that.
Second, while the measure is justified on the basis that the ability of the taxpayer--generally the man--to pay is reduced because he has to support his spouse and thus should be entitled to some relief, others would argue that in fact he's better off, because the spouse is providing work for free in the home in the form of child care or other household chores, and it would cost the taxpayer considerably more than $1,000 to replace that household labour.
Finally, some would argue that if we are to have such a subsidy, surely it should not go to the economically dominant person in the relationship, but rather to the woman who has no other income.
As long ago as 1970, the Royal Commission on the Status of Women in Canada, the Bird commission, recommended the repeal of this provision. Similar provisions have been repealed in most countries now, including the U.K., where revenue resulting from the repeal of the credit was used to fund a new children's tax credit.
My final comment relates to the current documents that I took a look at. One of the points often made in the gender budget analysis of 2006-07 is that while women may not benefit as much from certain tax proposals in tax dollars saved, they may benefit slightly more if you look at the issue as one of percentage of tax paid.
So, for example, when you look at those documents, changes to the child tax credit mean that women actually save less than men in terms of taxes payable—so they're not getting as much of the subsidy—but if you look at it from the perspective of percentage of tax paid, both men and women are in roughly the same position.
I suggest to you that the raw dollar figure is a much more important measure of fairness than the percentage of tax paid. And the reason is this: the measures we're looking at may be embedded in tax legislation, but they are actually social programs, and the tax system is simply the mechanism of delivery. We need to think of them as social or economic programs—the child tax benefit, the child care expense deduction, the GST tax credit, and I could go on. We need to think of them as social or economic programs, and when that's the focus, then how much one receives as the benefit is what really matters.
To evaluate a benefit by reference to a percentage of tax paid is somewhat incongruous. What really matters to the recipient is how much they save in terms of actual taxes they would otherwise have had to pay. And as we see from the 2006 and 2007 gender analyses, women are getting significantly less of a large number of these tax subsidies.
To conclude, my main message to this committee is that the gender analysis currently under way is a terrific start, but I believe it's incredibly important that the analysis be extended and applied to the current tax rules as well as to new budget measures.
Thank you.