In Sri Lanka, baby diapers are expensive––too expensive. For Sri Lanka’s low-income parents, this is an extreme burden.
In 2018, D A Jayamanne, a senior Fellow from Advocata Institute, a nonprofit organization in Sri Lanka, blew the whistle on this injustice by telling the tale of the Lady Ridgeway Hospital in a suburb of the country’s capital city, Colombo.
Each year this hospital performs hundreds of heart operations on babies from all around the country, free of charge. To lower the overall costs of the procedure, parents of the sick babies were requested to provide 7 disposable diapers per day. The average hospital stay for a baby undergoing a heart operation can last two weeks or even longer in some cases. That amounts to around 100 diapers each family would need to bring.
But in Sri Lanka, depending on the brand, a diaper retails for about $0.40 USD. The total cost for the 100 diapers amounts to $40USD.
According to The World Bank, the GDP per capita in 2018 for Sri Lanka was $3,853 USD. So that $40 for diapers is a major burden on their finances.
For many parents, the high cost of these requested diapers literally represented the life or death of their sick baby. They didn’t want to show up emptyhanded and risk being turned away. So many parents resorted to stealing diapers.
The problem became so widespread that the Lady Ridgeway Hospital took to social media and the press and urged parents to stop stealing diapers.
The sad part of this whole situation is that none of this had to happen.
The diaper costs would have been a lot lower for parents had it not been for the taxes the Sri Lankan government levies on imported diapers.
At the time, the taxes were over 60 percent per diaper. Now they are only slightly lower at approximately 52 percent per diaper.
This means a diaper in Sri Lanka should really cost about $0.27.
At the time, Jayamanne calculated that, for every three diapers bought, the Sri Lankan Government ‘stole’ at least one of them.
The high diaper tax is a combination of high import taxes and sales taxes. According to work done by Advocata Institute, these taxes include duty taxes, Port and Airport Development Levies, Value Added Taxes (VAT), and a Nation Building Tax. The removal of the Nation Building Tax, and reduction of the VAT since then has led to the tax burden dropping to 52%. That’s a good start, but not good enough.
All this means that there is a cottage industry of sorts that sources grey market diapers and sells them through social networks. Yes, diaper smuggling is a thing, at least in Sri Lanka.
This should be more of a scandal. In the United States, for example, there has been an ongoing movement in some states to abolish any and all taxes whatsoever on diapers.
So why is the Sri Lankan government taxing diapers at exorbitant rates? The main reason is that import taxes have been a convenient way to raise revenue for the government.
Stuck with a small direct tax base and large spending commitments, successive Sri Lankan governments have used these taxes on imports as a revenue raising measure. This means that all manner of imported products are taxed heavily. Other products, such as Tampons and sanitary napkins are also heavily taxed at 52 percent, and some products coming in from other countries are outright banned.
Economists have long advocated the abolishing of the complex para tariff system in Sri Lanka and moving towards a low uniform tariff structure. While the government has agreed in principle, the movement towards this is stifled by revenue concerns and, at times, because of the lobbying efforts of powerful local industry to keep its margins at the expense of the consumer.
In moving towards the goal of low tariff uniformity, diaper taxes should lead the way. While the VAT may be reasonable to apply for the sake of tax uniformity, other taxes on imports should have no place in a country that’s trying to encourage women to participate more in the workforce and promote upward mobility.
Cheaper diapers would make everyone’s life much easier. The diaper tax is a tax on choice and upward mobility, and on young parents and working mothers.
Like all indirect taxes, it’s regressive, so that the least well off pay the most as a share of their income. It should have no place in a forward-looking country. The Government should stop stealing baby diapers.
It’s time to end the repressive diaper tax. It’s holding too many Sri Lankan families back from the dignity they deserve.
(Much of this article is adopted from the original article “Who’s stealing baby diapers,” and used with the permission of the author, D A Jayamanne, Fellow at Advocata Institute, a Sri Lankan nonprofit organization dedicated to ending systemic poverty from the ground up.)