Tax Notes Talk
Tax Notes Talk
Gender Equality, Tax, and the Pandemic
Yvette Lind, an assistant professor of tax law at the Copenhagen Business School, talks about how the coronavirus pandemic hurt gender equality and offers possible tax solutions.
For additional coverage, read Lind's special report in Tax Notes: "Gender Equality, Taxation, and the COVID-19 Recovery: A Study of Sweden and Denmark."
Alexandre Marcellesi of Gibson, Dunn & Crutcher discusses his upcoming article in Tax Notes on creditor continuity of interest.
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This episode is sponsored by Avalara. For more information, visit avalara.com/taxnotes.
This episode is sponsored by University of California, Irvine Law School’s Graduate Tax Program. For more information, visit law.uci.edu/gradtax.
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Credits
Host: David D. Stewart
Executive Producers: Jasper B. Smith, Janelle Julien
Showrunner: Paige Jones
Audio Engineer: Jordan Parrish
Guest Relations: Christa Goad
Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: gender equality and pandemic fallout. 2020 was supposed to be a banner year for women. The United Nations planned it to be a groundbreaking year for gender equality initiatives. And here in the U.S., we were celebrating 100 years since women won the right to vote. Instead, however, the coronavirus pandemic hit, putting at risk the limited gains that were being made on equality issues. Yvette Lind is an assistant professor of tax law at the Copenhagen School of Business and recently co-authored a piece in Tax Notes looking at the impact of COVID-19 on gender equality and using the examples of Denmark and Sweden, the role of domestic tax systems. Yvette, welcome to the podcast.
Yvette Lind:Thank you, and thank you for having me.
David Stewart:Can we start from perhaps a historical perspective of how have tax systems tended to disadvantage women?
Yvette Lind:The basics and the core of gender equality on taxes and tax policy is to look at how women not only have equal access to labor markets, but also equal opportunity. So you have to look at it from a societal perspective as well, and not just from the tax code. So at the main basics which we have seen historically is if women are not only allowed to work in the labor force, but to what extent they are working and what opportunity they have. So the main traditional role in most societies historically, but also presently, is to have a family unit where there is a breadwinner. We call it the breadwinner model. So usually the main partner in a relationship will have this traditional role as the provider. They will work full time and take care of the family financially while most commonly the woman will stay at home either full time or working only part time taking care of the children and taking care of the home in what would be referred to as unpaid work. So this is historically been a problem for gender equality from many perspectives. It prevents women from actually gaining access to the labor market. It financially impacts them in many ways. This is also the main reasons why women will have a lower pension compared to men because they're not working as much. That being said, that is the basics. And that's also from the Nordic welfare state model we don't have joint taxation anymore. We have individual taxation. But I know in the U.S. and in many also conservative countries like Germany and the Mediterranean countries they still apply this tax unit model where we still have the promotion of the breadwinner model and the breadwinner family, where the male works full time. So that is the basics of gender equality when we apply the tax code and tax policy.
David Stewart:So what sort of approaches have been taken to address gender equality through tax and otherwise?
Yvette Lind:Interestingly enough, I mean, if we look at first in general the state and most common view would be for the tax code to be gender neutral. If the legislation is gender neutral, somehow one expects the outcome to be gender neutral, which we who are more focused on critical studies or gender equality research actually criticize that it's not that easy. And in many cases, gender neutral legislation has often actually made it worse off for women. So it's a bit naive to be honest and blunt to say that just, if you have a neutral legislation or neutral tax code, everything will resolve the neutrality between the genders. It won’t. One good example would actually be the historically we had in Denmark a widow pension. So there was a special pension provision only awarded to women and not men. And this is natural because women naturally live longer lives than men and women have also tendency you due societal expectations to marry older men and live longer than their men as well. So women will need additional support. Not only will they generally have lower pensions to begin with, but they will also not have the provider for the last term of their lives. So in this aspect we did have in the tax code a widow pension, but then we made the tax code gender neutral. So we removed this because it was promoting women. So we were going to apply this gender neutral. So in that sense, it actually hurt women because they got less now for the pension. But that would be a good example of how gender neutral sounds good, but it's not really when you apply it in reality. Because in reality men and women are not equal. I already said, naturally we will make longer lives, but also society wise we will, like I said, marry older men. We will work less in the labor force. We will work more in the home in unpaid work. We will take care of the children and all of this will have an impact on their financial results and your economic situation. So in this aspect, you kind of have to take in consideration and that's where gender researchers neutrally and normally come in and give advice. And to me the biggest obvious resolution to many gender equality problems would be to start applying individual taxation. When you apply as many states still do, joint taxation, you actually incentivize and encourage families to apply this traditional model of one working full time and one working nothing or part time. So by actually forcing them to be taxed as individuals, you will incentivize additional labor force participation and you will make it easier for women to participate. But I mean, you can also see that outside of the tax code and look at— women will often face hinders in the labor market when it comes to promotion or salary increase because their employer will say that they've worked less than their male colleagues because they were staying at home with children or they have been on maternity leave. And many countries, I think for instance Finland, have legislated equal share of paternity leave. So they are now forcing men to stay at home equally amount of time as the mothers. Otherwise they will not gain support from the state. That is one incentive to crush this hindrance of how that employers will no longer be able to say,"You spend less time than your male colleagues." Because if the male colleagues naturally also spend as much time at home, that won't be an issue. So there are many, many aspects to play in, but definitely that individual taxation versus joint taxation will be one big thing.
David Stewart:I'm curious about this question of the taxes. Being from the U.S., I'm used to the joint system. So when I look at the individual model, I wonder how does one move from a joint system to an individual system without disadvantaging people who have been advantaged by the existing system?
Yvette Lind:It’s a really good point. And I mean, all changes will have impacts. No solution is going to make winners of it all. But Sweden, for instance, had its big change in the 1970s. That's when we went from joint taxation to individual taxation. And we simply came a societal need for additional labor force. We simply said, the state said that we need additional workers. We can't afford as a society that half of the workforce is actually staying at home. So for us, it was more or less also societal change. There were enough work for women to participate a labor market. So I think also— I don't know exactly the U.S. situation, but I feel a lot of women are often ending up with part-time work. So, I mean, one big change here would actually be to facilitate full-time employment because if the family actually could have full-time employment for both of these spouses, it wouldn't be such an economic hit for them. I mean, they will pay more taxes if both work than if one stays at home. But as long as they have full-time employment to rely on, that will somehow mitigate the change if I'm thinking correctly here.
David Stewart:Turning to the current biggest topic of the day— the pandemic— what issues has the pandemic raised that has hurt the push toward gender equality?
Yvette Lind:I mean, just before the pandemic hit, we can see that women have a bigger tendency to work part time and not full time. That in itself has of course hurt them more because those who have been out of work now because of the pandemic are mostly those who work part time, those who could be the expendable workforce. So A) they have been extra vulnerable because of them not having full-time employment. But women have also— and this is interesting compared to previous financial crises, the sectors that have been mainly hurt are actually healthcare, childcare, education because of children are staying at home during the strict lockdowns and also healthcare sector being severely pushed to its limits. But also mostly letdowns of work have been female-dominated sectors. So they have been heard in many aspects. On the labor market they've been hurt. They've lost their jobs if they have been hit in specifically vulnerable sectors. But also when we see that there are lockdowns and people are forced to stay at home working and they have closed down the childcare sector or educational sector, the one who traditionally takes care of the child when both are home, is the female. So there we see what is commonly known by my academic colleagues. And I don't think anyone is surprised that if you have colleagues staying home with children, most of them will be taken care of by the spouse. So that is also of course, hit and affectde your labor participation, but also your labor results. And if you actually have to quit your job in order to take care of your children at that point.
David Stewart:Now you looked at the examples of Denmark and Sweden for your paper that was published in Tax Notes. Could you tell me about their responses to the pandemic and whether the choices they made helped or hurt the cause of gender equality?
Yvette Lind:It's very interesting actually, to compare Sweden and Denmark. I always enjoy those discussions being from Sweden myself originally and now living in Denmark because they've had so, so different reactions. Denmark was one of the first states among the EU states to close down. We had not a super strict lockdown like in Australia or the U.K. for instance, but most industries are locked down. Most people are working from home. In Sweden, it’s quite the opposite. There’s never been a strict lockdown or any similarities. In fact, the schools are still running. They have always been running the schools. Childcare is open. People are working to large extent at their workplace and not from home. So that has of course had an impact that— a positive impact in the sense that women have been able to keep working. But it's also— there are other impacts that are perhaps less beneficial for women. And if we look at, for instance, the state aid packages, the financial support packages that have been launched by the two countries, Denmark, since they closed down early, they started pumping in money to support the business sectors quite early on. Sweden has not. Sweden has argued— rightfully so I guess from the start— that since we didn't lock down so many businesses, we didn't close down, there was no need for financial support. Now of course the business sector has complained because even if you don't close down the sector, people of course have less people shopping and less money flowing in. So now they have started paying out financial support in Sweden as well, but not to the same extent. And also both countries have similar to most EU member states, they follow the EU recommendations and paid out support to the business sectors primarily. So if you pay out to business sectors primarily, and those sectors that have been supported are mainly male dominated. So in this sense, it's been supporting male-dominated sectors and men. I thought it was super interesting with Miranda Stewart from Australia telling us that they've had a very strict lockdown and most of their financial support has not gone to the business sectors. It's actually gone to households. And in this sense you can support individuals better. So I think it's very interesting. Then in hindsight, when once this is over and we actually started comparing strategies, then we can more easily see what was more beneficial or not. But I would say Sweden has had a less extensive and less good result when it comes to financial support. But thankfully for them not closing down industries and, and women still being able to participate in the labor market, that has had a positive effect.
David Stewart:So let's hope that we never have to go through something like this again. But if we were to face this situation anew, how would you like to see pandemic responses financially?
Yvette Lind:I would actually love to see more of the Australian response, to actually cover households, support households, and not just business sectors. Additionally, I think we need to be more open to how we design different financial aid, if it's going to be based upon income. And if it's based upon income, you should actually just look at the real situation, what is happening now, and not how it looked before. Someone who had high income and do not qualify for financial support now may have lost a job and actually be in need of support. I also think we need to stop handing out more general support. We actually need to be more need-based. In Denmark we had a stimulus checks similarly and was actually paid out in accordance to salary. So those who had kept their jobs and actually had higher salaries got more aid than those who lost their jobs and actually was in dire need of financial aid. So pensioneers and students got 500 Danish crowns, which is roughly$50. So I don't think that's the way to go. To be honest, we need to actually support individuals who need financial support and not just handouts in accordance to more general requirements that in the end support those who don't have a financial loss. Additionally, we need to start thinking more about childcare. If we close down the childcare sector, how can we support women who are working from home? How can we prevent them from ending up in this gender trap of just being a stay-at-home wife instead of actually being able to fulfill their labor force requirements?
David Stewart:Turning to the hopefully soon post-pandemic world, are there lessons that other countries can draw from the experiences of Sweden and Denmark for addressing gender equality?
Yvette Lind:I think Åsa Gunnarsson, my coauthor, makes a lot of good points. What has been beneficial for gender equality in the Nordic states is the fact that we are high-tax countries. We have a lot of taxation, high-income taxation in order to support through welfare benefits to have tax transfers. And that is the way to go to promote gender equality. So I actually enjoy seeing the discussions on wealth taxation or additional means to raise revenues in order to divide them more equally also. So those discussions we didn't have before the pandemic. I don't think anyone was really promoting wealth taxation or additional revenue sources at that point, but now we're doing it. And I think that's a really interesting discussion. Åsa often points out taxation evasion being a very big problem for gender equality and human rights because unless we don't have— we need tax revenues to actually be able to support this essential human rights and gender equality. So the discussions we're seeing now more generally about raising revenues and taxing more equally and actually taxing, that is in itself a step in the right direction.
David Stewart:Alright, this has been a fascinating discussion. I thank you for being here.
Yvette Lind:Thank you.
David Stewart:And now, coming attractions. Each week, we highlight new and interesting commentary in our magazines. Joining me now from her home is Acquisitions and Engagement Editor in Chief Janelle Julien. What will you have for us?
Janelle Julien:Thanks, Dave. In Tax Notes State, Steven Wlodychak examines the Switzerland-U.S. tax treaty in considering why states are not included in the international tax treaty system. Larissa Neumann explores recent initiatives that push for greater gender diversity in law firms. In Tax Notes International, Jeffrey Owens discuses a newly issued guide for policymakers on international investment agreements and their implications for tax measures. Abdul Muheet Chowdhary considers the role of the U.N. Committee of Experts on International Cooperation in Tax Matters and how it can be improved. Finally, on the Opinions page, Marie Sapirie examines proposed legislation that would create and publicly fund savings accounts for children that are intended to reduce the wealth gap. Joseph Thorndike discusses Franklin D. Roosevelt's attempt to retain a graduated tax rate for capital gains. The editors in chief of Tax Notes have shared their latest wish list of topics they hope to see tackled this spring. And now for a closer look at what’s new and noteworthy in our magazines, here is Tax Notes Federal Editor in Chief Ariel Greenblum.
Ariel Greenblum:Thanks, Janelle. I'm here with Alex Marcellesi, associate attorney with Gibson Dunn to discuss his upcoming Tax Notes piece on creditor continuity of interest. Welcome to the podcast, Alex.
Alexandre Marcellesi:Hi and thanks for having me.
Ariel Greenblum:We're happy to have you. To begin with, can you tell us a little about your article?
Alexandre Marcellesi:Sure. The article is about the credit continuity interest rules. So generally when you have one corporation acquiring stock or assets of another, the transaction can be a tax-free reorganization if certain requirements are met. One of these requirements is that a large enough part of the consideration that's received by the target shareholder be stock of the acquiring corporation. That's the continuity of interest requirement.
:The idea is that when the target shareholders get stock of the acquiring corporation, they maintain a continuous interest in the business of the target. The problem when the target is installment or bankrupt, the shareholders generally don't receive anything in exchange. They're at the very bottom of the capital structure and the creditors have to be repaid first. So if you didn't have special rules for bankrupt corporations, you could never have a tax-free reorg involving bankrupt or insolvent corporation.
Alexandre Marcellesi:The article is about the special rules that apply in those circumstances. Very briefly, what those rules do is they allow the target's creditors to step into the shoes of the shareholders just for purposes of that continuity of interest requirement. So the article just describes the application of these rules. I laid it out as a 10-step process, which is hopefully simple to follow. And then I have some examples that illustrate the rules using some tax patterns that are very common in restructuring transactions.
Ariel Greenblum:Thanks. What led you to write about this topic?
Alexandre Marcellesi:Well, it's been doing a lot of restructuring related tax work in the past year, including several deals that were structured as bankruptcy reorganizations, where that requirement, we had to check that it would be satisfied. Gibson Dunn does a lot of restructuring work, especially on the creditor side. And obviously 2020 was incredibly busy for us as I'm sure it was for everybody else. And the idea of the paper was really to write the paper that I wish had been available when I started looking into the issue. I wanted to write something that's hopefully clear and concise, and that can give somebody who has never looked into the topic, digestible overview and something that's easy to understand.
Ariel Greenblum:Where can listeners find you online?
Alexandre Marcellesi:I'm on Twitter at@alex_marcellesi. I don't tweet very much, but I use it mostly to talk and learn about tax, so always interested in connecting with new people there and on LinkedIn. Otherwise you can find me on the Gibson Dunn website.
Ariel Greenblum:You can find Alex's article online at taxnotes.com on March 15. And be sure to subscribe to our YouTube channel Tax Analysts for more in-depth discussions on what's new and noteworthy in Tax Notes. Again, that's Tax Analysts with an S. Back to you, Dave.
David Stewart:You can read all that and a lot more in the pages of Tax Notes Federal, State, and International. That's it for this week. You can follow me online@TaxStew, that's S-T-E-W. And be sure to follow@TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.
