On taxes and death

It is all about the taxes these days, whether in discussions among G7 leaders about the global tax rate, in tax reforms sparking protests in Colombia, or in President Biden’s attempts to reverse Trump’s tax cuts in the United States. But when it comes to gendered inequalities, we argue, it is always about the taxes.

Throughout the COVID-19 pandemic, International Financial Institutions (IFI)  – and the International Monetary Fund (IMF) in particular – have taken an activist role in managing the economic fallout of the health crisis highlighting, in words of the IMF Managing Director Kristalina Georgieva, that “unprecedented crisis demands an unprecedented response.”

Among the measures that the IMF has advocated for, or implemented, are increased access to emergency financing, extended debt relief services, calls for rich countries to support vaccination efforts in the rest of the world, and, most recently, a $650 billion allocation of its special drawing rights (SDRs). Although less than a half of this amount was intended for developing and low-income countries, Georgieva called the allocation “a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy.” IMF’s observers – including financial newspapers – note that many developing countries have thus far passed on the opportunity to take advantage of the IMF’s COVID measures, because of the conditions  associated with the IMF’s policies. Rich countries have blasted the global economic system with liquidity in order to protect their own investments in emerging markets rather than to extend a hand to developing country governments. Meanwhile, advocacy groups warn that the IMF’s continued insistence on conditionalities may lead to years of austerity in the post-COVID era, while simultaneously laying the blame for the collapsing health care systems on decades of structural reforms imposed by the IMF in exchange for its assistance.

While operating in pandemic crisis mode, the IMF has continued to promote gender equality in labour markets, first emphasized during Christine Lagarde’s term at its helm.  Acknowledging the disproportionately negative effects of the pandemic on women employment and the existence of  the “she-cession” and the “mom’s emergency,” the IMF has published working papers on the gendered impact of the pandemic in rich and poor countries alike. Its key policy prescription is gender responsive budgeting (GRB). The IMF, as we argued in our contribution to the RIPE special issue on gendered circuits of violence, views GRB as the bridge between gender equality and improved revenue mobilization or taxation. It sees maximising returns from both women’s labour market participation and taxation reform as keys to economic growth. According to the IMF, “gender-responsive policies and budgets are imperative to address widening gender gaps resulting from the pandemic.” It has now developed a “starter kit” that can “jumpstart” the GRB process.

Our own research on the fate of GRB measures in the Western Balkans (WB) (Bosnia and Herzegovina, Croatia, Montenegro, and North Macedonia, Slovenia) shows that GRB rarely improves gender equality as it purports to do. Failures of, or difficulties in, implementation are only one half of the story. The IMF continues to treat taxes – and its other frequently prescribed neoliberal policies – as entirely separate from the easy-to-use GRB toolkit. In the majority of countries, the most common GRB practice is “setting up relevant administrative machineries or conducting training sessions for public officials”. More elaborate GRB efforts in India, Mexico, Austria, Rwanda, and Ecuador have led to changes in fiscal policies towards health and education or to greater gender-sensitive accountability in public spending. The disconnect between GRB and taxation was a recurrent theme in our article, which demonstrates that conventional IMF’s policies imposed significant structural limits to GRB’s effectiveness as a remedy for gender inequality.

In the Western Balkans, where IFIs’ leverage intensified through successive rounds of policy reforms, VAT (value-added tax), a form of regressive taxation, was promoted because it was seen as efficient, easy to implement and reliable. Its ambiguous effects on gender equality were a non-issue for policy makers. On top of externally funded consumption-led growth and financialization, and inadequate government spending on social protection, health and education, the impact of VAT on household consumption has generated vicious circles of gendered inequalities. With the limited fiscal space available to governments dependent on IMF loans, even successful implementation of GRB could hardly make a dent on gender equality.

The pandemic has both revealed and exacerbated the devastating impact of IFI-led economic reforms in the Western Balkans over the last two decades. The region has experienced an exceptionally high level of COVID-19 cases per capita and high levels of mortality.  As of September 20, 2021, four WB countries were ranked among the top 20 states globally with the highest death rate per 100,000 people (Bosnia and Herzegovina, Croatia, Montenegro, and North Macedonia). Bosnia and Herzegovina placed second, right after Peru. The tragic toll reflected years of warnings about unsustainability of Western Balkans health care systems, austerity and increased out-of-pocket payments for health after the Global Financial Crisis, privatizations, corruption and decrease in patient’s rights, and departures of health care workers for better paid positions in Western Europe in particular. The health care sector in the entire region employs mostly women; even among medical doctors the proportion is almost 2:1 in favour of women. Years of de-funding have had a doubly negative effect on women – with the feminization of the precarious workforce occurring alongside increased pressures on women as the main carers in households.

As in the rest of the world, policy responses to COVID-19 have varied widely across WB, although in the main they have mimicked the EU. They range from measures directed at health care provisions and protection of particular sectors (tourism in particular) to wage subsidies, deferred tax payments, especially for businesses, and direct payments to individuals. Kosovo, North Macedonia and Serbia extended the range of VAT exemptions, and in Kosovo deferral of domestic VAT and property taxes was also allowed, in an attempt to temper pandemic induced slump in consumption.

Covid support packages in the WB region have ranged between 1% and 7% of GDP, but their scale was a fraction of what was spent elsewhere (e.g. Great Britain 15%; Germany 17%), due to fiscal space limitations and restrictive access to financial markets. Few gender-sensitive measures of any consequence have been adopted. Echoing patterns around the world, while 34 out of 90 measures in WB were gender sensitive, 25 of those were stop-gap measures directed at domestic violence, 6 were support for unpaid care and only 3 were supposed to alleviate gendered economic insecurities.

All WB countries, except Serbia, have availed themselves of IMF’s assistance. Serbia, meanwhile, continued to fund its infrastructure projects with Chinese loans, relied on Russia for its energy needs, raised money with Eurobonds and went on a shopping spree for heavy armaments – all the while taking in the EU COVID-19 support funds also. Successful vaccine diplomacy enabled Serbia to acquire enough vaccines to offer them free of charge to the citizens of Bosnia and Herzegovina who spent hours in border queues to cross to the first available vaccination centre. While its citizens relied on the charity of its neighbours- Serbia and Croatia- to access vaccines, Bosnia and Herzegovina authorities’ attention was on how to divide emergency IMF funding among the different government levels.

The fact that the decades of policy reforms overseen and supported by the IFI have left this region with fewer fiscal levers to re-boot their economy in the pandemic aftermath, reinforces scepticism we voiced in our article that, so far, promoting gender equality in the Western Balkans has been little more than an empty gesture. Over the last few decades, fragile and post-conflict states have often served as the sites of experimentation for IFIs’ policies. They were also the harbingers of austerity measures that would later, especially in the aftermath of the Global Financial Crisis, be used elsewhere, including in the EU, exacerbating inequalities and gender disparities.

COVID-19 has brought to light the close association between inequality and health vulnerability, even mortality. If we want to rebuild a more equitable world after the pandemics – we must start by reforming taxation. No spending reforms – including Gender Responsive Budgeting – can compensate for the deep, profound inequities built into our (by now) global tax systems.

It is, indeed, all about the taxes.