Tax Reform in Open Economies

Tax Reform in Open Economies

International and Country Perspectives

Edited by Iris Claus, Norman Gemmell, Michelle Harding and David White

The eminent contributors (including Altshuler, Creedy, Freebairn, Gravelle, Heady, Kalb, Sørensen and Zodrow) investigate the beneficial directions for medium-term tax reform in the light of global developments and lessons from the latest taxation research. In addressing this issue, they review recent advances in both the theoretical and empirical tax literature and reform evidence from individual countries. Topics covered include the impact of taxes on economic performance; international and corporate taxation; personal tax and welfare systems; environmental taxation; and country-specific tax reform experiences.

Chapter 9: Employment Incentives for Sole Parents: Labour Market Effects of Changes to Financial Incentives and Support

Jacinta Dalgety, Richard Dorsett and Steven Johnston

Subjects: economics and finance, financial economics and regulation, public finance, public sector economics

Extract

* Jacinta Dalgety, Richard Dorsett, Steven Johnston and Philip Spier 9.1 INTRODUCTION The New Zealand Government has used the tax system as a vehicle for delivering family-targeted social assistance since 1986 when Family Assistance Tax Credits replaced other social assistance for families that was paid entirely through the Department of Social Welfare. Although subject to some criticism (see, for example, Kornhauser, 2009; Ventry, 2007), paying social assistance through the tax system reduces costs by using existing administrative structures, allows greater flexibility in payment schedules than traditional welfare systems and increases the takeup of income-tested entitlements (Ventry, 2007). This chapter looks at the impact of family-targeted social assistance paid through the tax system on the employment rates of sole parents, who in recent decades have had relatively low levels of engagement with the labour market. 9.2 POLICY CHANGES AFFECTING SOLE PARENTS Sole parents are a diverse group: some have the necessary skills and are able to work while others face multiple barriers to employment. National and international evidence indicates that effective support for clients who are not work-ready includes focussing on confidence, raising skill and employability levels, specialist services that increase levels of social participation, and addressing mental health barriers (OECD, 2008; MSD, 2002). 194 Employment incentives for sole parents 195 Successful interventions for work-ready sole parents focus on providing financial incentives and reducing external barriers, for example, by improving access to quality childcare and finding jobs with family-friendly hours (OECD, 2008). New Zealand has promoted employment of sole parents though the...

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