MPs approve new tax on baby diapers

The tax is contained in the Value Added Tax (Amendment) Bill, 2023 which the lawmakers passed on Thursday, 04 May 2023.

The Bill had earlier proposed exemption on payment of tax on diapers but the Members of Parliament (MP) put up a spirited fight against the proposal.

Efforts by the deputy chairperson of the committee on finance, planning and economic development, Jane Pacutho and the Minister of State for Finance, Amos Lugoloobi, to convince MPs to exempt payment of Value Added Tax (VAT) on diapers were resisted.

While presenting the committee’s report, Pacutho stated that the exemption was premised on medical reasons.

“The committee observed that diapers are not bio-degradable which makes them an environmental hazard. The proposed change in the law aims to clarify that, it is adult diapers that are treated as medical goods but not all diapers,” she said.

Lugoloobi said that VAT payment on the rest of the diapers would fetch the country sh2.6b annually in revenue.

Shadow Minister of Finance, Muwanga Kivumbi, however, presented a minority report saying that the committee’s findings that diapers are not bio-degradable were not based on facts. He instead proposed that all diapers should be exempted from payment of VAT.

“It defeats the logic that only adult diapers are treated as medical goods and not children’s diapers. All diapers should qualify for tax exemption,” said Muwanga Kivumbi.

The Leader of the Opposition, Mathias Mpuuga, said the expected tax from diapers is dismal and that all diapers should be exempt from tax.

“Government will raise a paltry sh2.6b but not mentioning the transactional cost of collecting this money. We would like to see government collect as much revenue as possible but we do not also want government to just perform rituals,” Mpuuga said.

Muhammad Nsereko MP Kampala Central then proposed that Government should tax all diapers to avoid a discriminatory law.

“If we are to tax, let us tax everyone; if we are to exempt, let us exempt everyone,” he said.

The MPs also introduced a tax on non-resident producers of electronic services such as e-Bay, Amazon, Ali express, Netflix, Facebook, Twitter and Google who are offering services to non-taxable persons in Uganda.

Dicksons Kateshumwa MP Sheema Municipality however sought clarification on how this tax would be enforced since the companies are non-resident.

“Who is going to issue the invoice? Who is going to pay because that is very important for us to determine the ultimate burden on whom it is going to fall under?” he said.

Lugoloobi said that several businesses are migrating online and so are measures for taxing such transactions.

 “As businesses migrate online, we have to equally migrate because if we do not do that, then we are not going to be able to raise our tax to Gross Domestic Product ratios from the current 13 per cent,” said Lugoloobi.