Lessons Learned from Tanzania’s Recent Menstrual Product VAT Flip Flop
Understanding the Recent Policy Reversal on Taxing Disposable Pads in Tanzania
Written by Claire Thomas (IMHER Research Assistant)
Edited by Rachel Florman (IMHER Research Assistant)
In July 2018, the Tanzanian Government removed the VAT (“Value Added Taxes”) from disposable menstrual pads , joining a small group of countries that no longer tax these items. However, just one year later, the government suddenly announced that it would be fully reinstating the tax.
There has been relatively little news coverage about this policy pivot to this point. However, there seem to be many potential lessons to be learned from it for anyone working towards the elimination of female-focused taxes globally.
At IMHER, our research team has been researching the change by reading through media reports, and by interviewing some stakeholders working on menstrual issues in Tanzania. We also encourage those working on menstrual product taxation issues in Tanzania and elsewhere to share their experiences in the comment section below.
- In 2004, Kenya became the first country to eliminate a value added tax on menstrual products, initiating a movement against a “tampon tax” around the world.
- Since then, other countries, including Australia, Canada, Colombia, and India, Malaysia, Nigeria, and South Africa, have removed VAT on menstrual products, with proposals for other tax reductions in many other countries, states, and provinces around the world. Sometimes these changes are made solely with respect of menstrual products, and sometimes they are tied to other kinds of female-focused products as well.
- Tanzania had passed the original menstrual product VAT elimination bill on July 1, 2018. It did so through the work of an active coalition comprised of advocates, government officials, NGOs, producers, wholesalers, retailers, and corporate representatives.
- Government officials suddenly eliminated the VAT exception on June 13th, 2019, with a full reinstatement of the VAT as of the first of July. It was replaced with a temporary reduction in corporate taxes for menstrual product producers. The reason provided by the government was that consumers were seeing sufficiently lower shelf prices to justify keeping the tax in place.
- While there had been some “buzz” in previous months that a policy change might be possible (see, for example, this op-ed written in late May suggesting that the legislation should be kept in place), the elimination of the previous year’s gains was still quite surprising and frustrating to the many coalition members who had worked to pass the 2018 legislation.
- We have not been able to find public opinion data to establish public reaction to the change. However, a hashtag campaign – #PediBilaKodi, meaning “pads without tax” – has helped to create public awareness and opportunities for action via social media. Also, there are some indications of dissatisfaction regarding some other recently added “pink taxes” in Tanzania (see below), so there may be the potential for additional public pressure to be applied on this issue.
Key Arguments Against Taxing Menstrual Products
Activists have typically sought tax elimination or reduction on menstrual products on the basis of two primary claims: that menstruation is a human right, and that lifting the tax will bring eventual economic growth.
- Social: Proponents of the tax elimination often argue that most menstruators (and especially those at lower income levels who often cannot access hormonal alternatives) have no choice whether or not to menstruate. Partly as a result of this, menstrual products should be seen as a human right. With a tax elimination, relatively more women can afford menstrual products.
- Economic: Lower taxes on menstrual products should reduce the economic burden faced by women, because the products they may pay for already will be less expensive. And more women will be able to afford them who cannot already.
Moreover, although the research basis for a product/educational outcomes linkage has not yet been determined, menstrual hygiene products have quite regularly been framed by advocates as an investment in women’s ability to finish their schooling. Should a relationship between menstrual product access and school completion eventually be demonstrated, the World Bank finding that every percentage point increase in the proportion of girls who complete secondary education results in a .3% increase in a country’s GDP could add power to the case for eliminating taxes on menstrual products.
Statements by the Tanzanian Government
Tanzania’s Finance and Planning Deputy Minister Dr. Philip Mpango argues that the tax relief has not reduced prices for consumers, but has instead resulted in greater profit by producers, wholesalers, and retailers. He says that the government is still receiving complaints of unreasonable pricing on sanitary items and is “looking for the best options that will yield positive impact for women and the government”.
In place of the VAT tax exemption, the government has proposed what it likely considers to be a compromise solution: a 5% reduction in the corporate tax for disposable sanitary pad manufacturers, to be retroactive back to July 1, 2019.
The reduced corporate taxes would be in effect for two years, with the implication that the issue would be revisited and renegotiated prior to the end of that time period.
Reactions by those doing MH work in Tanzania
Within Tanzania, the sentiment among those working on MH issues whom we spoke with seems to be that the action was sudden, and premature at best. Some also note the following:
- Some MH advocates feel that the tax reinstatement is a continuation of nationwide gender inequality. Many roponents of the tax elimination believe in this as a step towards women’s ability to spend more time in school and in work and to improve their access to quality health care. Some point at a new tax in Tanzania on wigs and hair extensions as an example of how “pink taxes” help to reinforce gender inequality there.
- Although some retailers did not reduce the price, others did, and there seems to be no data available about the extent of the issue either way. 90% of product sales are through small shops in Tanzania, with a long chain of distribution, resulting in high transportation and distribution costs placed on to consumers. The only data that we have seen mentioned (a study conducted by I4ID and RoutePro, collected in Mbeya and Morogoro in March to April 2019); we do not have that report, but descriptions we have seen of it seem to suggest wide variation in pricing across shops, rather than consistently high pricing (it also is not clear to us as to whether they measured before/after price changes, or just 2019 prices.)
- Not enough time may have passed to see the effects of the tax removal to see results.
- Some studies have shown that VAT reductions do not always do much to benefit consumers, and instead benefitting other parties along the retail chain. As such, it is possible that the concerns of the government may have been valid; however, it is an open question as to whether enough time had passed in order to draw that conclusion in this case.
- Kitto Kabwe, and Tanzanian economist testified to parliament a few weeks ago that it had acted too fact in eliminating the exemption, “When we scrapped this tax the whole world applauded. And many countries followed suit. And now we want to take a step backwards? Is 12 months really enough to do an evaluation?”
- Research on the impact of VAT removal internationally has shown varied results in terms of the prices of products on shelves over time. Moreover, some degree of delay is to be expected, especially given that it rarely applies to old stock that has to sell out before prices can be lowered. To many involved in these issues, one year seemed to be too short of a time frame in which to draw firm conclusions.
- Many store owners may not have yet learned that the change occurred. In a country like Tanzania where the vast majority of sales occur in small, non-chain stores, information about taxation changes does not always make it out to every store owner. In discussions with IMHER, some working on MH issues in Tanzania questioned whether store owners – especially owners of small stores in rural areas – were ever even aware of the change at all.
- Beyond lack of retailer education around VAT changes, lack of education around menstrual hygiene may have also been a contributing factor. Some MHM advocates we have spoken to in Tanzania attribute the return of this tax to a lack of knowledge around menstruation and problems associated with lack of access to menstrual products. In this view, retailers and politicians view these products as a discretionary consumer good rather than a human right and/or medical necessity. As such, some advocates feel that greater education for retailers by the MHM community – and perhaps more time to put those educational efforts in place – could potentially help assure that any savings from a tax removal would go to consumers, rather than being pocketed by shops and retailers.
- Some feel that the government could have prevented this outcome but did not choose to do so. Some MH advocates in Tanzania have argued that the government has the capability to regulate a reduced end price for consumers but did not choose to do so. The legislation could have imposed regulations on manufacturers to ensure the tax reduction would be passed on to consumers or encourage other efforts such as product firms including indicative prices. However, provisions of that nature were not included in the original legislation.
This article by Anna Bwana (written on behalf of Tanzania’s Menstrual Hygiene Management Consortium) and this Facebook post cover many of the issues above. We cannot fully characterize the views of everyone working on these issues, however, so we encourage others to weigh in with their own perspectives below.
Some Possible Next Steps in Tanzania
- Go back to the proverbial drawing board. Engage in further work by coalition members to reinstate the earlier (full) tax elimination. As part of that, try to develop greater collaboration between manufacturers, distributors, retailers, government officials, and menstrual health advocates to increase education about menstrual hygiene products at all levels (schools, retailers, and political elites). Work to frame access to menstrual health products as a human right and/or a medical necessity, rather than as a standard discretionary consumer product.
- Focus more on implementation as part of the legislation. Have a greater emphasis on government and private sector collaboration for better price regulation and reduction immediately after bill passage. Consider implementing regulations that ensure a price reduction is passed directly to consumers. This may include support provisions along the supply chain, such as free or subsidized transportation costs, which can affect retail pricing.
- Work to facilitate more public and retailer education opportunities. Work to facilitate more discussions between business, government representatives, and the public to help them understand the need for tax change around these issues, and what reasonable expectations will be in terms of the speed of implementation. More transparency about decision making processes, more public hearings, and more data to be made publicly data could help to that end, along with more education around menstruation more generally in schools and communities, to increase awareness and comfort around these issues.
- Consider building more linkages to growing outrage over “pink taxes” more generally. The relatively greater number of news articles online expressing outrage about the new tax on wigs and hair extensions suggests that there may be an opportunity to tap into mounting dissatisfaction by women at extra costs they face relative to men more generally, either in terms of framing, or in terms of actual legislation. The extent to which different issues should be linked in terms of policy passage would need to be considered (after all, it can become more difficult to reduce taxes when the potential amount of revenue lost becomes greater). But it is worth considering the extent to which bridges and coalition coordination can and should be built across issues.
Some Lessons Learned for Similar Efforts Elsewhere
- Coalitions are key. Work to form a coalition to put everyone on the same page, with a number of different stakeholders (i.e. menstrual health experts, menstruation product manufacturers, distributors, and government representatives.) Remember that creating a diverse coalition can also help facilitate education around the issue across sectors.
- Locate powerful “champions” in government. It tends to be fruitful to start by identifying and lobbying female parliamentary members/ political representatives, agency heads / cabinet heads / ministers, and ambassadors as potential “champions” of female-focused issues, who can then persuade their male allies of the need for change. Also focus on involving any member from a government agency with budgetary authority over the legislation, such as a minister of finance or a federal revenue authority member. Also consider reaching out to the wives (“first ladies”) of powerful male lawmakers, a creative lobbying tactic addressed in a previous blog post by IMHER.
- Consider working on behalf of all menstrual products, rather than just a single type. To create a broader and more unified coalition around such issues than will otherwise be possible, consider including all types of menstrual products rather than just some. In Tanzania, the VAT elimination was focused exclusively on disposable menstrual pads, while excluding reusable pads and menstrual cups. Given that a tax reduction for one type of product ultimately can make another type of product relatively more expensive on the shelves, targeting certain products for tax benefits have the potential to not only limit the size of coalitions, while also potentially creating opposition among those who would otherwise be allies on most MH policy issues.
- Consider enforcement issues from the start. From the beginning, identify how pricing incentives and /or enforcement should be integrated into legislation. However, also remember that pricing regulation and oversight is not risk free for producers and retailers; small wording differences in legislation can make a big difference to the potential for profitability and flexibility to respond to marketplace changes.
- Perhaps include a requirement for data collection as part of the legislation. Transparency may do at least some of the work of enforcement. To the extent that data can be made available on retail and wholesale pricing after tax reduction legislation passes, those involved in the sales chain may be somewhat less inclined to pocket extra profit along the way. Consider looking into options for making systematic data collection and publication part of the legislation.
- Never let your guard down even after a political victory. In practice, it tends to be much harder to change existing law than to let the laws on the books stand; as a result, once a new bill is passed, it tends to be hard to remove it. Even so, the Tanzanian case demonstrates that political coalitions sometimes need to be ready to mobilize quickly, even after notable progress has been achieved, because backtracking is sometimes possible.
Passing legislation is almost always challenging. And this recent example from Tanzania reminds advocates that they should be ready to fight some of the same battles again – potentially even quickly – even after it seems like victory has finally been achieved.