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A gender deduction gap

Vol: 
4/2017
Author name: 
Varela, P
Year: 
2017
Month: 
July
Abstract: 

This paper uses Australian tax return data and techniques from the gender pay gap literature, including the Oaxaca-Blinder decomposition and the DiNardo-Fortin-Lemieux decomposition, to explore whether men in similar economic circumstances to women claim more deductions on their tax return. After controlling for observable characteristics such as income and occupation, men are found to claim around 12 per cent more deductions than women, which when taken at face value, increases the gender pay gap in Australia by around \$75 per year. The paper also finds an unexplained gender difference in 7 of 11 categories of deductions and amongst workers in 6 of 9 occupation classifications. Men and women earning different proportions of capital income and family tax planning are considered as potential explanations of the observed deduction gap. While both factors are found to influence the level of deductions claimed, they can only explain a small proportion of the observed difference in deductions between men and women.

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