Vat On Mosquito Nets Affects Malaria Control

Robert Busulwa | 22 May 2007
Perhaps it is not very alarmist to say that today millions of people in Uganda live under the threat of malaria and other mosquito-borne diseases.

Malaria transmission is as high as 90 per cent of Uganda. Almost 40 per cent of outpatient visits and 35 per cent of inpatient admissions are due to malaria and up to 100,000 people, mainly children under five and pregnant women, die from malaria each year in Uganda, according to the malaria control programme in Uganda.

One of the now recognised controls in fighting the malaria prevalence is sleeping under an insecticide treated mosquito bed-net (ITNs).

Despite the alarming malaria prevalence and the ministry of Health's campaign to rid this country of malaria, not enough effort has been made to reduce on the cost of ITNs so that every body can sleep soundly under them.

By the Abuja Declaration of April 25, 2000 African heads of state were committed to "reduce or waive taxes and tariffs for mosquito nets and materials, insecticides . . . and other recommended goods and services that are needed for malaria control strategies" so that the most vulnerable populations, especially pregnant women and children under five years, "benefit from the most suitable combination of personal and community protective measures such as insecticide treated mosquito nets" Seven years on and there are still persistent issues concerning this ideal.

The ministry of Health's stated treatment policy towards fighting malaria is through artemesinin-based combination therapy. But, the situation has become pitiful because the major vectors of the disease are increasingly developing resistance to commonly developed drugs.

A recent status report by Netmark Africa [Taxes and Tariffs on Mosquito Nets and ITNs in Africa] reviewed over 30 countries. It showed that certain countries have abolished some, if not all taxes, levies and or import duties. For instance, Zambia has fully abolished levies and taxes including VAT, whilst Tanzania retained VAT until 2003.

Uganda has also adopted some proposals, for instance before 2000, import duty was charged on ITNs at 38 per cent but now this has come down to 0 per cent. Following this reduction, sales of ITNs increased four-fold. Against this background however, is the issue of Value Added Tax (VAT) which has not been fully addressed.

Broadly, VAT is a tax on final consumption of goods and or services. It is charged between businesses throughout the production and distribution chain. Where the expenditure represents a business expense, a VAT-registered trader which accounts for VAT on its own sales can recover the VAT that it has been charged. VAT is therefore a multi- stage tax being borne by the final consumer. The VAT Act 1996 does not include mosquito nets or mosquito treatment kits in its list of VAT exempt supplies.

The effect of an exemption is to relieve the exempt sector from the scope of VAT, while at the same time denying the right to recover input tax which has been charged previously.

This increases the cost to a business dealing in exempt supplies and therefore the cost of goods or services passed onto the final consumer.

For this reason, one would not counsel exempting mosquito nets from VAT as this would increase the costs to the commercial marketing sector of ITNs and especially the Long Lasting Insecticide treated Nets (LLINs), which can last anywhere from 3 to 5 years depending on the manufacturer.

ITNs (and preferably LLINs) are one of the most effective means of preventing malaria, yet many households do not have ITNs due to several barriers, one of the most important being cost.

This is because, given the level of market prices, low-income households would have to spend a substantial share of their annual disposable income to purchase a bed net.

One way to decrease the retail price of nets and increase household use is to eliminate all taxes and tariffs imposed on finished nets, netting materials and insecticides.

The ministry of Health promotes the sleeping under a bed net every night as 'the best protection against malaria'. It is therefore puzzling to see that bed nets attract VAT at the standard rate (currently 18 per cent) whilst medicines and drugs are zero rated. Isn't prevention better than cure?

The government should consider mosquito nets as health goods and not luxury items.

Parliament should then amend the law to include tax exemptions to 'health goods' to include, but not limited to, mosquito nets (both ITNs and LLINs) and other peripheral products like the retreatment kits, insecticides for retreating nets for personal and or human consumption. These amendments would help increase the coverage and utilisation of nets in Uganda and help alleviate the malaria burden in this country. The tax loss of this measure would be small indeed.