Legislators have passed the Value Added Tax (Amendment) Bill, 2023, which includes a tax on diapers and rejects an exemption for adult diapers.
The Deputy Chairperson of the Committee on Finance, Planning and Economic Development, Hon. Jane Pacutho, argued that the exemption was based on medical reasons.
However, the Minister of State for Finance, Hon. Amos Lugoloobi, stated that the tax on all diapers, including adult diapers, would bring in UGX2.6 billion annually in revenue.
“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.
Shadow Minister of Finance, Hon. Muwanga Kivumbi presented a minority report stating that all diapers should be exempt from 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.
Hon. Muhammad Nsereko (Indep., Kampala Central) suggested that if a tax is to be applied, it should be applied equally to everyone.
“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, including Amazon, Netflix, Facebook, and Google, who offer services to non-taxable persons in Uganda.
Hon. Dicksons Kateshumwa (NRM, Sheema Municipality) raised concerns about how the tax on non-resident producers of electronic services would be enforced since these companies are not physically present in Uganda.
“Who will issue the invoice and who will ultimately bear the burden of this tax?” he asked.
In response, Hon. Amos Lugoloobi, the Minister of State for Finance, explained that as more businesses move online, the government needs to adapt its tax policies to reflect this trend.
“We need to migrate our tax system online to capture revenue from e-commerce transactions and increase our tax-to-Gross Domestic Product ratios from the current 13 percent,” Lugoloobi said.