Why we should tax tampons, and everything else.

Tax on tampons is a hot topic, with Tony Abbott and Joe Hockey in major disagreement. The issue was brought into the spotlight via a petition on communityrun.org.

“And how can a bodily function be taxed? Because the government doesn’t consider the tampons and pads we’re forced to buy every few weeks ‘necessary’ enough to be GST-free.

On the other hand, condoms, lubricants, sunscreen and nicotine patches are all tax-free because they are classed as important health goods. But isn’t the reproductive health and hygiene of 10 million Australians important too?”

I didn’t sign the petition, and here’s why

Sanitary items are different from “condoms, lubricants, sunscreen and nicotine patches”, because people already want to use them, and there is no evidence of significant public health risk if usage falls. Also, “necessity” is not the binding criterion for determining what gets taxed – we tax electricity.

“Half the population menstruates and they shouldn’t be financially penalised for it.

If you still aren’t convinced, let’s consider some statistics: on average women, who make up the majority of people who use sanitary products, earn $262.50 per week less than their male counterparts, and they are also statistically at greater risk of living below the poverty line. Furthermore, this tax disproportionately targets those who may already be disadvantaged, that is the homeless and unemployed.

So why force this underpaid, at risk and disadvantaged portion of society to pay more for basic essentials?”

Healthy women menstruate for about half their life. So, less than 25 per cent of the population menstruates. How big is the financial burden of this tax on them?

A 16 pack of brand-name tampons costs $4 at Coles. Let’s estimate a woman spends $10 a month. GST on that adds up to $12 a year.

The number of people who can’t afford tampons because of GST is therefore negligible. The number of people pushed into poverty because of that $12 slug would be small. Most people campaigning against this tax have no trouble affording $12 a year.

So if you want to make a difference to the financial well-being of poor women, this is an indirect and very marginal approach. It comes with real trade-offs – it would cost the government revenue. That undermines the ability of society to support the poor.

Here’s a petition I’d support instead: raising income support payments to a more reasonable level.

WHAT’S REALLY HAPPENING

If this petition is not really about public health, necessity or fairness what’s it about?

People hate paying tax. They really hate taxes they can’t avoid. They then create ex-post reasons why they should not have to pay tax, generally involving the welfare of the wretched. (Their own benefit is merely incidental to the social good they’re pursuing!).

The mining industry showed the way, with its campaign against the mining tax, focused on the health of small towns and communities. The big polluters mimicked this in killing the carbon tax, worrying about the electricity bills of families on the bread-line.

It’s no surprise these tactics have spread – they’re extremely effective!

The crux here is whether there is a link between fairness and avoidability. Is a tax fair only if there’s a way to avoid it?

Unavoidable taxes are the backbone of our revenue raising system. We already raise lots of revenue effectively through big taxes on things everyone agrees are “good,” like earning income and buying clothes. I’ve previously written that we need more taxes nobody can avoid.

Tax theory says not to introduce loopholes. That was the mantra when I worked at Treasury – maintain the integrity of the system. Always use payments to solve problems, because exemptions are not targeted and get exploited.

But perhaps I am out of step with community sentiment.

Hate for (certain) unavoidable taxes goes back a long way – Poll taxes brought down Margaret Thatcher, for example. Also, exemptions to the GST were what bought it enough legitimacy to be introduced.

I sometimes wonder if sin taxes – tax on alcohol and cigarettes for example – are to blame for the way people see tax in general. A lot of people interpret the tax system as a moral agent judging their actions. If I saw all tax as punishment, I’d be furious about paying tax on sanitary items too.

Tax is not punishment, so maybe we should rename sin taxes to something other than taxes. What we should not do is carve up the system with more exemptions.

Exemptions undermine the efficiency of the tax system but also the sense that tax is our common duty.

I see plenty of normal people arguing that big companies that contort themselves to pay very little tax in Australia are “just doing what anyone would do”. The sense that everyone can and will avoid tax at every turn is pervasive.

I don’t mind paying tax because I can see the benefits it brings. (even though I’m quite aware it’s not all spent efficiently.)

“Tax is what we pay for civilized society.” US Supreme Court Justice Oliver Wendell Holmes, Jr.

Thanks for reading this far! If you’d like to agree, disagree or accuse me of obnoxious mansplaining please do so below, and I shall attempt to respond!

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

14 thoughts on “Why we should tax tampons, and everything else.”

  1. Agreed. In respect of condoms, it would be better to tax those too, and provide free dispensing options to high risk groups. As Gailbraith said, ‘if you want to feed the chickens, don’t feed the horses and expect the chickens to pick the leftover seeds out of the manure”.

    Liked by 1 person

  2. “because people want to use them”? Poor choice of words. If only it were a matter of “want”. Sanitary products really are unavoidable if you are a woman under 50. And the costs aren’t just for yourself but for any daughters you are economically supporting. For a poor family with, say, two daughters it’s not an insignificant cost.

    Does the incremental GST cost on condoms or sunscreen really deter people from use? The incentives for their use are considerable and I doubt adding GST would dent demand at all. I think the issue here is one of perceived fairness – they are all taxed or they aren’t.

    Liked by 2 people

    1. I take your point about daughters, and in a single parent household that could be expensive. But I still think the way to solve that is with transfer payments. Tax exemptions go to everyone, not just the needy.
      As for the marginal value of tax exemptions on sunscreen and condoms, I don’t know of any research on the effect, but I’d love to see it!

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      1. You make a good point about the taxes on these items going towards assisting the more vulnerable in our society, but thanks to john Howard then PM, increasing the LVT to $1000.00 on imported goods making them import taxes and GST free, when the LVT in the US UK and Canada’s is only $22.00, Australian women will simply shop online and import their sanitary items tax free and even freight free from overseas, so that defeats your concept.

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      2. Jason you ARE clueless. You totally and unequivocally miss the point. If I, or anyone one else have to explain the point, you still won’t understand.

        Liked by 1 person

      3. Sanitary Pads are a side issue (yes I am male), but seriously GST should have no exemptions. e.g. food is no more essential for rich or poor but exempting it was foolish. The rich buy more food and more expensive foods which are GST exempt. How is this a benefit to the poor or even the less well off? GST on everything and taxation assistance targeted on a sliding scale is fairer. Then the shopkeeper has no red tape on whether a chook is hot or not.

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  3. It’s a symbolic issue. Rationally, and I’m definitely not saying women are less rational than men, women should be campaigning for things like better maternity leave or services for domestic abuse.

    But symbolically, taxes on tampons seems like a tax for being a woman. Symbolically it seems like the tax system is against women.

    Liked by 1 person

  4. I thought I was going to agree with you on reading the headline but it turns out I agree with myself. I remember my feminist sensibilities being offended by this issue in 1999, and they still are, only I am now more pro GST, and my solution has changed: Let’s just tax sunscreen and condoms and be done with it.

    Liked by 1 person

  5. Cheers! the smartest solution here would be to tax everything so the tax code is really simple and streamlined and low cost to administer. Then provide much more powerful income supoprt to the genuinely needy. There’s no need to provide me with a tax break for eating Kale. I’ll eat it at any price!

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  6. The issue is that this is an unavoidable tax for women, men can readily avoid it.

    Here is a list of things that are GST free: https://www.ato.gov.au/Business/GST/When-to-charge-GST-%28and-when-not-to%29/GST-free-sales/Main-GST-free-products-and-services/

    They include things like medicines and health care. Basically a stack of things that might be necessary for maintaining the health of the community.

    The reason bulk-billing exists, and people are so up-in-arms about a GP co-payment is that we don’t want to do anything to deter people from good health practices. Prevention is better than a cure. Likewise sanitary products are about maintaining good health.

    Similarly “cars for disabled people to use, as long as certain requirements are met” is on the list. It’s there so as not to tax a group of people who are already paying more for a car, and who can’t avoid that extra cost for a vehicle. It’s the same argument women are making. They are a segment of the community that can’t practically avoid buying sanitary products; why should they be taxed for it as well?

    These are inconsistencies in the way the GST is applied. There are exemptions for health and for sections of the community facing unavoidable costs that the general community doesn’t. But not for a necessary women’s health item.

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    1. I do take your point. I guess it depends on whether you see all those other exemptions as laudable tax policy or dubious policy necessary for winning public support. If the latter, you want to minimise the precedent effect.

      Most people only see the price difference as relevant. They don’t see the complexity added to the tax code. And they don’t see the creeping effect of a growing belief that tax is something you should be able to avoid. This latter point is something I am quite obsessed with as it’s what stands in the way of two of my favourite policies – congestion pricing and land tax!

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  7. The introduction of GST was a classic example of why the move in the taxation system had to be taken out of the hands of politicians and put to the people. Whether it would have got through or not is secondary to the dealings that went on in the corridors of the politicians and produced the exemptions which complicated the application of this tax. And we are where we are now, squabbling over some penny point scoring that in the past, as a married man I paid for equally from our household wages. Food and medical care and condoms should have GST applied. The person who buys the most expensive GST free foods gets an unfair advantage over the person who buys the cheapest to survive – a little emotive; but true. Who said don’t complicate the tax system, and don’t create loopholes that will be exploited. Care of the vulnerable in our society falls to the setting of safety nets and tax thresholds – a redistribution of tax to where it serves the best interest in a social society. I am sure an economist could put that better than I.

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