What is Pink Tax?
Pink tax is the extra cost that ladies bear for products that are specially designed and sold to them. It is the additional hidden cost ladies incur for using ordinary items used by them, exclusively such as garments, hairstyles, cleaning, etc. These products are used by females from across the age, including young kids, to school goers, to adults, to aged females.
As per a study conducted by the New York City Department of Consumer Affairs, women pay around 7% more on generic products as compared to men. The range goes to 13% more for personal care products used by women than men. This type of tax is not limited to any specific country and is levied in each nation around the globe.
How much do extra tax ladies pay?
Several surveys have been conducted across the globe on the Pink tax. It was found that ladies pay about 42% more than men in one year. In dollar terms, a woman spends more than US$1,300 in one year, if average life of a woman is assumed to be 70 years, the amount of money comes to be US$91,000.
A 2015 research on Pink tax covering 800 products was released by the New York City Department of Consumer Affairs. The research revealed that ladies pay about 7% more to buy a similar product that has been designed for men.
For example, females pay 7% more for toys and accessories during their kid age. Growing up, girls have to pay 4% extra on their clothes, which further increases to 8% during adult clothing age. The disparity is more striking when it comes to personal care products, which are fundamental necessities, prompting women to pay 13% extra on these products. Finally, senior ladies pay 8% more on health and home care products used by them.
While Research shows that Women pay more for using female-centric products as compared to men spending money for a similar product, women makes only US$0.82 per dollar than a man makes for providing the same service for the year 2018. Adding to that, women are charged more compared to men on similar products.
Upon deep diving on this imbalance, it was found that the choices a woman makes during her professional path affects her pay scale. Pay scale becomes imbalanced when a woman takes career breaks during pregnancies, or when she seeks flexible working hours to manage her family, thus barring her from promotions. In addition to that, it was found that women are sometimes not equally treated by employers on assumptions that they may leave the job to pursue family.
Fortunately, there are a lot of steps that can be taken to battle this issue. A woman can switch to men's or unisex products like razors or cleanser. Or, on the other hand, a woman can shop cautiously for the products she needs. A few organisations decrease the cost of ladies' items they offer to limit the impact of the pink tax.
Apart from this, there are other measures too to tackle pink tax. A woman can use credit card options to get a cashback, which can counterbalance the extra charges. Several online platforms and drug stores offer good cashback or points on credit card payments. The cashback or reward points can further be redeemed to compensate for the pink tax paid by women.
A woman can also buy products in bulk quantity, saving a huge amount for women on per-unit costs. One can easily find huge discounts on a pack of three or six. Buying shampoos, razors and other personal care products may cost much less than usual per unit cost. While buying in bulk, it should be kept in mind that bulk buying may impact one's pocket. So, buy products smartly.
Apart from this, a woman can buy gender-neutral or unisex products to avoid pink tax. Personal preference must be kept in mind while buying these products.
In addition to that, everyone should start boycotting companies that charge higher prices for similar products for men and women. Everyone must take the initiative to support companies that take a stand against the Pink tax.
Supporting women-owned products can also be an option to promote female entrepreneurs by raising awareness for ladies-owned products.
Several states in the United States have passed various laws against the Pink tax, which creates gender-biased prices of products for men and women.
Apart from this, in 2019, Governor Andrew M. Cuomo released the 10th proposal for the 2020 State of the State Agenda with an aim to drop the pink tax. The proposal was based on the study results of the New York City Department of Consumer Affairs. The governor’s proposal was followed by a row of actions taken to reduce the gender-biased gap. Earlier, the governor had signed a legislation to stop tax on menstrual products, making NY the first state to ban tampon tax.
In addition to that, the Scotland government passed the Period Products Bill in 2020, ensuring the free availability of menstrual products such as tampons and pads to the needy ones. The government estimated around US$32 million costs for this unanimous move.
Five states in the US - New Hampshire, Alaska, Delaware, Oregon, and Montana don’t have any type of sales tax on tampons and menstrual napkins. Massachusetts, Maryland, Minnesota, Pennsylvania and New Jersey previously legislated unanimously to remove these items' taxes. Since the start of 2015, more than 24 states have introduced bills to revoke sales tax on tampons and menstrual napkins.
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Apart from the US, Kenya revoked sales tax on feminine hygiene products in 2004 and spent millions to facilitate pads in schools. Canada has also dodged its service tax on tampons in 2015. In October 2018, Australia also decided to have stop charging service tax on feminine hygiene products. However, further approval is still left by individual territories. Aberdeen started the distribution of woman hygiene products to lower-income groups as an aim for a longer-run program. The United Kingdom has also eradicated the tampon tax. Several major chains in the country have cut prices on women hygiene goods and products.
Ability-to-Pay Taxation The neoteric trending concept in which the tax is levied as per the taxpayer’s economic ability to pay. It is based on the concept that a person who earns more should pay more taxes and the one earning less should pay less.
What is accounts payable? Accounts Payable (AP) is an obligation that an individual or a company has to fulfill for purchasing goods and services bought from their suppliers and vendors. AP refers to the amount that is not paid upfront and can be paid back in a short period of time. Hence, a good or a service purchased on credit to be paid in a short period will fall under AP. For individuals, AP may include the bill paid after availing services such as television network, electricity, internet connection, or telephone. Most of the time, the bill is generated after the designated billing period, depending upon the amount of consumption. The customers have to pay this obligation within a stipulated time to avoid default. What is accounts payable from a Company’s point of View? AP is the amount of money a company is liable to pay to its suppliers or vendors and clear dues for purchases of goods and services purchased from its suppliers or vendors. AP is required to be repaid in a short period, depending on the relationship with suppliers. It is essentially a kind of short-term debt, which is necessary to honour to prevent default. As the current liabilities of the company, AP is required to be settled over the next twelve months. It is presented in the balance sheet as the account payable balance. For example, Entity A buys goods from Entity B for US$400,000.00 on Credit. Entity A has to pay back this amount within 60 days. Entity A will record US$400,000.00 as AP while Entity B will record the same amount as Account receivable. AP is also a part of the cash flow statement. The change in the total AP over a period is shown in the cash flow statement, hence it is part of the company’s working capital. It is widely used in analysing the cash flow of the business and cash flow trends over a period. AP may also depict the bargaining power of the company with its vendor and suppliers. A vendor or supplier may give the customer a longer credit period to settle the cash compared to other customers. The customer here is the company, which will incur AP after buying goods on credit from the vendor. There could be many reasons why the vendor is providing a more extended credit period to the firm such as long-term relationship, bargaining power of the firm, strategic needs of the vendor, the scale of goods or services. By maintaining a more extended repayment period to supplier and shorter cash realisation period from the customer, the company would be able to improve the working capital cycle and need funds to support the business-as-usual. However, prudent working capital management calls for not overtly stretching the payable days as it might lead to dissatisfaction of supplier. Also, investors tend to closely watch the payable days cycle to determine the financial health of the business. When the financial conditions of a firm deteriorate, the management tends to delay the payment to their suppliers. Why accounts payable is an important part of Balance sheet and Cash Flow Statement? As inferred from the previous paragraphs, AP is part of the current liabilities of the balance sheet. This is an obligatory debt that has to be paid back within a time frame so that the company does not default. AP primarily consists of payments to be made to suppliers. If AP keeps on increasing over a period of time, it can be said that the company is purchasing goods or services on credit more, instead of paying up front. If AP decreases, it means the company is reducing its previous debts more than it is buying goods on credit. Managing AP is essential to have a stable cash flow. In a cash flow statement prepared through an indirect method, the net difference in AP is shown under cash flow from operating activities. The business entity can use AP to create the desired variation in the cash flow to some extent. For example, to increase cash reserves, management can increase the duration of paying back the credit taken for a certain period, thus affecting the net difference in AP. What Is the Role of Accounts Payable Department? Every company has an accounts payable department and the size and structure depend upon how big or small the enterprise is. The AP department is formed based on the estimated number of suppliers, vendors, and service providers the company is expected to interact with; the amount of payment volume that would be processed in a given period of time; and the nature of reports that a management will require. For example, a tiny firm with a low volume of purchase transactions may require a simple or a basic accounts payable process. However, a medium or a large enterprise may have a accounts payable department that may require a set of practices to be followed before paying back the credit. What is the Accounts Payable Process? Guidelines or a process is important as it provides transparency and smoothness in facilitating the volume of transactions in any time period. The process involves: Bill receipt: when goods were bought, a bill records the quantity of goods received and the amount that needs to be paid to the vendors. Assessing the bill details: to ensure that the bill or invoice copy includes the name of the vendor, authorization, date of the purchase made and to verify the requirements regarding the purchase order. Updating book of records after the bill is collected: Ledger accounts need to be revised on the basis of bills received. The department makes an expense entry after taking approval from management. Timely payment processing: the department takes care of all payments that need to be processed on or before their due date as mentioned on a bill. The department prepares and verifies all the required documents. All details entered on the cheque along with bank account details of the vendor, payment vouchers, the purchase order, and the original bill and purchase order are scrutinized. The department also takes care of the safety of the company’s cash and assets and prevents: reimbursing a fake invoice reimbursing an incorrect invoice making double payment of the same vendor invoice Apart from making supplier payments, AP departments also takes care of travel expenses, making internal payments, maintaining records of vendor payments, and reducing costs Business Travel Expenses: Bigger entities or firms whose business nature requires all personnel to travel, have their AP department manage their travel costs. The AP department manages the personnel’s travel by making advance payments to travel companies including airlines and car rentals and making hotel reservations. An account payable department may also deals with requests and fund distribution to cover travel costs. After business travel, AP may also be responsible for settling funds supplied versus actual funds spent. Internal Payments: The Accounts Payable department takes care of internal reimbursement payments distribution, controlling and petty cash controlling and administering, and controlling sales tax exemption certificates distribution. Internal reimbursement payments include receipts or both substantiate reimbursement requests. Petty cash controlling and administering includes petty expenses such as out-of-pocket office supplies or miscellaneous postage, company meeting lunch. Sales tax exemption certificates comprise AP department handling sales tax exemption certificates supply to managers to make sure qualifying business purchases excludes sales tax expense. Maintaining Records of Vendor Payments: Accounts Payable maintains information of vendor contact, terms of payment and information of Internal Revenue Service W-9 either manually or on a computer database. The AP department lets management know through reports on how much the business owes at present. Other Functions: The accounts payable department is also responsible to lessen costs by identifying cost structures and creating strategies to reduce the spending of business money. For example, minimising cost by making payment of the invoice within a discount period. The AP department also acts as a direct point of contact between an entity and the vendor. How to Calculate Accounts Payable in Financial Modelling Financial modelling enables calculating the average number of days a company takes to make bill payments. AP days can be calculated using the following formula: AP value can be calculated using the following formula: What is accounts payable turnover ratio? AP turnover ratio shows the capability of a firm to pay cash to its customer after credit purchases. It is counted as an essential ratio to analyse the cash management attribute of the firm and its relationship with vendors or suppliers. It is calculated by dividing purchases by average AP. Purchases by the company are calculated as the sum of the cost of sales and net inventory in a given period: Now let’s understand this with the help of an example. Let us suppose, Cost of sales of Company XYZ for the period was $60,000, and XYZ began with inventories worth $21000 and ended at $15000. AP at the beginning was $20000, and $15000 at the end. Now the purchases will be $66000 (60000+21000-15000). The average AP will be $17500. Therefore, the AP turnover ratio will be 3.77x. Dividing the number of weeks in a year by the AP turnover ratio will give the number of weeks the company takes on average to settle its payables. In this case, it will be around 13.8 weeks (52/3.77). What is the difference between Accounts Payable vs. Trade Payables? Though the phrases "accounts payable" and "trade payables" are used interchangeably, the phrases have slight differences. Trade payables is the cash that a company is obligated to pay to its vendors for goods and supplies which are part of the inventory. Accounts payable include all of the short-term debts or obligations of a company.
The de minimis rule is used to determine that whether the price accretion or price appreciation of securities bought at a discount will be taxed at the capital gains tax rate or ordinary income tax rate.
Earned income credit (or EIC) is defined as a refundable tax credit made by the government (USA) to low-to-moderate-income earning individuals and couples, particularly with offspring. The amount of tax credit usually varies as per the income of an individual and upon the number of dependable on a person.