Image by: The Kathmandu Post
SHARAD PRASAD KOIRALA*
Nepal currently levies 13% Value Added Tax (VAT) on sanitary napkins and other similar feminine articles (collectively called “tampon tax”) under the category of luxury goods.1 There exists a 15% import duty on sanitary napkins, while the import duty on essential raw materials for production of sanitary napkins like cotton and pinewood pulp aerate is at 5% for domestic producers of sanitary napkins.2 The result of higher import duties and VAT is an increase in the market price of menstrual products and thus, affordability becomes a bigger issue than availability. It has been observed that due to such affordability-availability issues, a large percentage of menstruating Nepalese women use unhygienic alternatives to sanitary napkins,3 which adds to the unhygienic menstrual practices (taboos) in Nepal. Additionally, the unjustified tampon tax adds to the legal, social, and economic inferiority of women in the country.4
Period poverty is an important area of concern in the Nepalese context. Be it the affordability of sanitary products at the individual and family level, or the accessibility to sanitary products, toilets, hand washing facilities along with menstrual hygiene education at home, schools, or workplaces, women during their menstrual days face great challenges. Further, menstrual issues have been one of the main reasons for school absenteeism among female students in Nepal.5 There have been many efforts by various organisations to address this issue of “period poverty” and school absenteeism by ensuring free accessibility to sanitary napkins. The government allocated NPR 1.8 Billion (approximately USD 16 Million) in FY 2076-2077, for the free distribution of sanitary napkins in government-aided schools6 but, there were a lot of shortcomings in its application.7 Therefore, a potential solution that the government has largely ignored, could be a simple change in the legislation by removing such sanitary napkins from the category of luxury goods, which, however slightly, would lessen the burden on the consumers.
2. Asking the Woman Question
Questioning is a means to “valid knowing”.8 However, historically, feminist questions on taxation had largely remained ignored.9 Women’s historic absence from legislative bodies has paved the way to the gender-biased tax system that we see today.10 While most of the taxation laws are gender-neutral, what can be seen is the presence of “gender blindness” because the reality that is present is that, when it comes to tax exemptions in necessary goods, gender has a centre-stage but has been ignored.11 For example, in some states of the US, one can observe that tax exemption was provided on non-essential goods but not on menstrual goods.12 Such “red tax” has been read with a much broader concept of “pink tax”, where it has been observed that feminine products were taxed more than their male equivalents.13 Only by asking the woman question can justifications and rationalisation be demanded and the discrimination and disabilities caused by such taxation, be removed.14 The woman question(s) while addressing the issue of suffrage were; why women should not vote and why should women vote.15 On similar lines, the questions this article addresses are; is tampon tax discriminatory, thus violating the constitution and, if there is any justification for such discriminatory tampon tax in Nepal. The objective of asking the woman question is to identify the gender implication of the laws that apparently seem gender-neutral or objective. In the legal field, asking the woman question means to examine how the law fails to take into account the experiences and values that are more typical of women than of men.16 Similarly, there also exists the critical tax theory, which asks why tax laws are the way they are and their impact on divisions of society like race, colour, sex, gender, etc.,17 which has been addressed below.
3. Fundamental Right and Human Right Violation
3.1. Violation of International Human Rights
The tax hurdle on the path to menstrual hygiene violates the AAAQ framework i.e. availability, accessibility, acceptability, and quality framework of the International Convention on Economic, Social and Cultural Rights (ICESCR).18 Furthermore, such discriminatory taxation violates Article 12 and Article 14 (2) (h) of the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW).19 While Nepal has ratified these international conventions, it has largely failed in its application.20 Tampon taxation is another such instance of violation of the aforementioned international conventions.
3.2. Is the Tampon Tax Discriminatory?
(While the tampon tax might violate many provisions of the constitution, the article is only concerned with such taxation being discriminatory.)
The European Court of Human Rights (ECtHR) has recognised discriminatory tax treatment on the basis of sex. For instance, in the case of Van Raatle v. the Netherlands,21 the ECtHR found it to be discriminatory to exempt unmarried and childless women above 45 years of age from taxation (as under the General Childcare Benefits Act) without such exemption being provided to men who fulfil the same criteria. Similarly, the court has found it discriminatory to provide Widow’s Bereavement Allowance (tax benefit) to widows but not to widowers, as such tax benefit lacked a legitimate aim.22 Similarly, in lack of legitimate justification and objective, the court found a tax regime to be discriminatory in another case as well, wherein, the widow would have been provided with the tax benefit, had she been in the same circumstances as the widower. However, the widower was not provided with such tax benefit.23 (Lack of legitimate justification and objective of tampon tax in case of Nepal has been discussed below in 3.2.1.)
However, in regard to the violation of the right to equality, the first question that arises is; is the tampon tax discriminatory? For instance, as a critique of feminist jurisprudence, there arose an argument that there cannot arise discrimination on the grounds of pregnancy simply because a man cannot get pregnant but a woman can.24 A similar reasoning can be seen in the case of Geduldig v. Aiello.25 So, is a similar argument applicable here? Can it be argued that there cannot arise tax discrimination simply because menstruation is a natural phenomenon only seen in females, and not in males? This can be answered by looking into the case of Bray v. Alexandria Women’s Health Clinic wherein it was decided that “a tax on wearing yarmulkes is a tax on Jews”.26 On this basis, it has been argued that taxing sanitary napkins as luxury goods is analogous to taxing yarmulkes as luxury goods, and thus is discriminatory.27 The question is not to be answered on the grounds of biological differences between the sexes but on the fact that one’s essential commodity is taxed more in comparison to the others’ essential commodity. For instance, authors have taken the example of spermicidal contraceptives and erectile-dysfunction medicines being tax-free, as a ground to justify why women’s menstrual products should also be tax-free.28 Further, it has been rightly argued that Gedulgid (a decision which has been largely criticised) while poses a challenge to the argument that tampon tax should be considered as a sex-based discrimination, cannot be implemented in case of discriminatory tampon taxation. Observing the Indian Case of Nargesh Meerza,29 wherein it was decided that penalising pregnancy amounts to sex-based discrimination even if a man cannot get pregnant, it can be concluded that biological differences in sex do not prevent discrimination from being established. A sex-based tax is discriminatory even if members of the other sex occasionally are the purchasers of the product.30 Therefore, it is on these grounds that tampon taxation violates the right to equality.31
3.2.1. Is there any Justification for the Discrimination?
There are tax differences between the two sexes that are not discriminatory because of the presence of a legitimate objective that the law aims to achieve. For example, the difference in taxation between the two sexes in the case of land registration.32 However, is there any similar justification for the presence of tampon tax in Nepal?
It has been argued that one of the reasons to keep the tampon tax is that it contributes to the state’s budget.33 However, given that a very less portion of women use sanitary napkins, the argument fails in the Nepalese context. Further, the argument fails because, given the practice of welfare state, the government instead is spending money to make the products available for free of costs. Therefore, revenue does not seem to be the reason to keep the tampon tax. Further, even if it did contribute substantially to the state’s budget, it cannot justify the discriminatory measure.34 Next, economists argue that inelastic goods need to be taxed for revenue generation. However, this argument is defeated by the reasons provided above against the budget contribution argument. Further, given the presence of alternative products (although unhygienic) in Nepal, sanitary napkins are somewhat elastic products, even if they might be inelastic in developed nations.35
188.8.131.52 Case Where Sanitary Napkins is Produced by Domestic Manufacturers.
The next argument on why the tampon tax should exist, can be understood by taking a recent example from India. Finance Minister of India, Nirmala Sitharaman, while dealing with Integrated Goods and Services Tax (IGST) on COVID-19 relief materials and services, stated that a tax exemption would increase the manufacturing costs, as the tax credit obtained upon purchase of input goods cannot be deducted against the final output GST liability. The input tax credit gets blocked and thus, the price will be raised by the producers bringing back the situation that existed while the tax was imposed.36 Now, this argument that price will increase in case of exemption assumes that the role of the state is absent. The solution to this input tax blockage (in case of tax exemption) is that the state can bear the cost of the blocked input tax credit. The state can also put a cap on the increase in price (profiteering) that can be done by the producers. For instance, the Black Marketing Act, 2032 (1975) puts a cap of 20% on profiteering.37 It is within this 20% that the producers can increase their profit margin to recover the blocked input tax.
Now, the reasonable solution, instead of VAT exemption, is to classify sanitary napkins as zero-rated goods.38 (Further discussed below). Adding sanitary napkins to zero-rated goods as listed under Schedule-II of the Value Added Tax Act, 2052 (1996) should be done. When it comes to zero-rated goods, there can be no tax on input supplies or the input tax can be credited, despite the final product not being taxed. However, in context of Nepal, firstly, there is no system for exemption on input tax in as under the “zero-rated classification”. Thus, the only option is that the input tax is credited despite the output not being taxed, thus refunding the input tax.39 While zero-rated goods are mostly in regard to exports, there is a need to recognise sanitary napkins (along with other necessary goods) as zero-rated goods despite them not being exported.
VAT exemption may instead be detrimental to the aim of removing period poverty, and enlisting sanitary napkins as a zero-rated good seems to be the way forward. An observation made in the case of India, observed that the price increases due to exemption.40 (See the figure below). Now, while the government can take the burden of removing input tax blockage (in case of exemptions), it can also lessen the price burden by lessening the import duty on the materials required for production in the first place.
Therefore, it can be concluded (from 3.2.1 and 184.108.40.206) that there does not appear to be any reasonable justification to the discriminatory tampon tax in Nepal and, thus, it should be removed with the product being enlisted as a zero-rated good, while also decreasing the import duties.
(However, while classifying necessary goods as zero-rated goods is more efficient, it should be noted that, generally, in practice, exemption is provided on necessary goods instead of enlisting them as a zero-rated good. A plain reading of Schedule-II of the VAT Act concludes that only those goods and services that are exported outside of Nepal are provided with “zero-rated privilege”. Therefore, in practice, sanitary napkins made for domestic consumption will not fall under Schedule-II. Next, while exemption can be useful, as the final 13% of tax is not applied, but it does not ensure that selling price will decrease, as the producers can increase the price of the product since their input tax is not being credited.)
220.127.116.11 In case of Import of Sanitary Napkins
Tax exemption might be effective only in case where the sanitary napkins are being imported. Currently, there is no exemption on sanitary napkins. Thus, upon import, custom duty, excise duty, and VAT are applicable, which raises the price. Finally, again, output tax is applicable along with a profit margin which again adds to the price.
Once exemption as under Schedule-I of the VAT Act is provided, there is no presence VAT or “input tax” upon import (unlike that in the case of manufacturing). Thus, there is no issue of blockage of input tax due to exemption (since input tax does not exist). Thus, a VAT exemption on the output tax can be effective here in case of imports, due to the absence of input tax blockage. However, what should be understood is that, while there is no issue of input tax blockage, the initial cost (cost of production or rather, cost of import) itself is very high (due to high custom duty and excise) in case of import as compared to the case of manufacturers, and thus, the selling price is still high as was in the case of manufacturers being provided with exemption.
In the case of Nepal, sanitary napkins are largely imported and an alternative to make such products more accessible with the government’s involvement would be to make the nation self-sufficient in regard to such products. Thus, manufacturing such products is important. However, as already noted, in the case of manufacture, tax exemption is not effective. Thus, it can be concluded that tax exemption in the case of manufacturing and tax exemption in the case of import, both are ineffective as price would still be high. Thus, the reasonable solution is to make the nation self-sufficient with enough manufacturers and enlisting the product as zero-rated good.
The concept of human flourishing is important to be understood. The theory provides that necessities like food, shelter, etc., including necessities like education, medical supplies, etc. should be accessible without any taxation.41 The income tax of Nepal follows progressive taxation, while indirect tax, although equal for all, is regressive in nature because the lower-income class spend more percentage of their income on indirect tax than those belonging to the high-income class. Tampon tax adds to such regressive nature of indirect taxation, disproportionately affecting females.42 It is to prevent such regressive taxation that countries provide exemption (or enlist them as a zero-rated good) when it comes to essential goods. We can thus conclude that zero-rated products benefit the lower-income consumers,43 which should be the aim of a welfare state. However, such practice has not been observed when it comes to sanitary napkins.
One can observe that courts (in the US) have interpreted menstrual products to fall within the definition of “medical necessities” to provide such articles with a tax exemption.44 However, the position was not so in the past. It was only achieved after the “woman question” was asked and addressed. The reasonable solution lies on the individual states; their legislature and the courts to address the problem.45 A writ has been filed before the Supreme Court for removal of such taxation. Therefore, the court should recognise these grounds and direct removal of luxury tax from products that fall within the classification of medical necessity. It is true that “exemption” or “zero-rated classification” of sanitary napkins might not affect the issue of period poverty substantially. Rather than taxation, the issue with affordability is due to poverty and price itself, of which, the tampon tax forms a lesser percentage. However, the court should be more concerned with what is wrong and what is right rather than the degree of influence of the removal of such taxation, and establish that the tampon tax is discriminatory.
(The article attempts to highlight why VAT exemption might not be as effective as intended. It might help to reduce the price but it might not achieve this end. What is more effective is enlisting the good as a zero rated good, which absolutely helps in reducing the price for the consumers by removing the VAT.)
(Further, although the article uses the term “sanitary napkins”, the arguments and suggestions can be used in regard to other sanitary products as well.)
(The editorial board is thankful towards CA Durga Prasad Gnawali, Partner at NBSM, for his advice.)
(This article has been prepared for informational purposes only and does not constitute legal advice. The information contained is not intended to create a lawyer-client relationship. The views expressed in the article does not reflect the the official position of the institutions to which the authors are affiliated. Readers should not act upon this without seeking advice from professional advisers.)
1 Value Added Tax Act 1996, s 7.
2 Shuvangi Khadka, ‘Making sanitary pads cheaper or free?’ (Econ-ity, 15 April 2021) <https://econitynepal.com/making-sanitary-pads-cheaper-or-free/ > accessed 14 August 2021
3 Samantha Friborg, ‘How 1 Education Focused Program Tackles Period Poverty in Nepal’ Brogen Magazine (Seattle, 4 October 2020) <https://www.borgenmagazine.com/period-poverty-in-nepal/ > accessed 14 August 2021
4 United States v. Virginia, 518 U.S. 515, 516 (1996)
5 Niroj Bhattarai, Alexandra Bernasek and Anita Alves Pena, ‘Factors Affecting School Attendance and Implications for Student Achievement by Gender in Nepal’ (2020) Review of Political Economy < https://www.tandfonline.com/doi/abs/10.1080/09538259.2020.1769296?journalCode=crpe20 > accessed 14 August 2021; Bridget J. Crawford, ‘Tampon Taxes, Discrimination and Human Rights’ (2017) Wisconsin Law Review 491<https://digitalcommons.pace.edu/cgi/viewcontent.cgi?article=2068&context=lawfaculty > accessed 12 August 2021
6 Editorial, ‘1.3 million girls in Nepal to receive free menstrual supplies’ (Reliefweb, 3 September 2020) <https://reliefweb.int/report/nepal/13-million-girls-nepal-receive-free-menstrual-supplies > accessed 13 August 2021
8 Cochac Elkayam-Levy, ‘A Path to Transformation: Asking “the Woman Question” in International Law’ (2021) 42 (3) Michigan Journal of International Law 429 < https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3543189> accessed 13 August 2021
9 Lawrence Zelenak, ‘Taking Critical Tax Theory Seriously’ (1998) 76 North Carolina Law Review 1521 <https://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1535&context=faculty_scholarship > accessed 12 August 2021
10 Maya Rhoden, ‘President Obama Doesn’t Understand the ‘Tampon Tax’ Either’ TIME (15 January 2016) <http://time.com/4183108/obama-tampon-tax-sanitary/> accessed 14 August 2021
11 Hailaire Barnett, Introduction to Feminist Jurisprudence (Cavendish Publishing 1998) 22
12 Bridget J. Crawford and Emily Gold Waldman, ‘The Unconstitutional Tampon Tax’ (2018) 53 University of Richmond Law Review 439 <https://lawreview.richmond.edu/files/2019/02/CrawfordWaldman-532.pdf> accessed 14 August 2021
13 Suzanne Herman, ‘A Blood-Red-Herring: Why Revenue Concerns Are Overestimated in the Fight to End the “Tampon Tax”‘ (2021) 48 Fordham Urb LJ 595 < https://ir.lawnet.fordham.edu/cgi/viewcontent.cgi?article=2835&context=ulj > accessed 14 August 2021
14 Hailaire Barnett (n 11).
16 Katherine T. Barlett, ‘Feminist Legal Methods’ (1990) 103 Harvard Law Review 829 <https://scholarship.law.duke.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1119&context=faculty_scholarship> accessed 14 August 2021
17 Anthony C. Infanti and Bridget J. Crawford, Critical Tax Theory: An Introduction (Cambridge University Press 2009) 11
18 International Convention on Economic, Social and Cultural Rights (adopted 16 December 1966, entered into force 3 January 1976) 993 UNTS 3 (ICESCR) art 12; Office of the High Commissioner for Human Rights, ‘CESCR General Comment No. 14: The Right to the Highest Attainable Standard of Health’ (Art. 12)’ (E/C.12/2000/4)
19 International Convention on Economic, Social and Cultural Rights, arts 12 and 14 (2) (h).; Bridget Crawford ‘Tampon Tax be Gone: What the US Can Learn from India’s #LahuKaLagaan Repeal (Part II/II)’ (National Law School of India Review, 25 December 2018) <https://nlsir.com/tampon-tax-be-gone-what-the-us-can-learn-from-indias-lahukalagaan-repeal-part-ii-ii/ > accessed 12 August 2021
20 Dagan Omwesiga, ‘Tax Regime in Nepal – Implications on Human Rights’ (2018) 6 Kathmandu Sch L Rev 68 < https://kslreview.org/index.php/kslr/article/view/949> accessed 12 August 2021
21 Van Raalte v Netherlands App no 20060/92 (ECtHR, 1997)
22 Hobbs v United Kingdom App no 29750/09 (ECtHR, 2007)
23 Willis v United Kingdom App no 36042/97 (ECtHR, 2002)
24 Katherine T. Barlett, ‘Feminist Legal Methods’ (n 16) 841-842.
25 Geduldig v. Aiello, 417 U.S. 484 (1974)
26 Bray v. Alexandria Women’s Health Clinic, 506 U.S. 263, 270 (1993)
27 İlayda Eskitaşçıoğlu, ‘Access to Menstrual Products is a Constitutional Right. Period.’ (Verfassungsblog, 5 December 2019) <https://verfassungsblog.de/access-to-menstrual-products-is-a-constitutional-right-period/> accessed 14 August 2021
28 Bridget J. Crawford and Emily Gold Waldman, ‘The Unconstitutional Tampon Tax’ (n 12) 439.
29 Air India v. Nargesh Meerza, 1981 AIR 1829
30 Victoria Hartman, ‘End the Bloody Taxation: Seeing Red on the Unconstitutional Tax on Tampons’ (2017) 112 Nw U L Rev 313 < https://scholarlycommons.law.northwestern.edu/nulr/vol112/iss2/4/ > accessed 14 August 2021
31 Constitution of Nepal 2015, art 18.
32 Dagan Omwesiga, ‘Tax Regime in Nepal – Implications on Human Rights’ (n 20).
33 Suzanne Herman, ‘A Blood-Red-Herring: Why Revenue Concerns Are Overestimated in the Fight to End the “Tampon Tax”‘(n 13) 620.
34 Christopher Cotropia and Kyle Rozema, ‘Who Benefits from Repealing Tampon Taxes: Empirical Evidence from New Jersey’ (2018) 15 J Empirical Legal Stud 620 <https://scholarship.richmond.edu/law-faculty-publications/1503/> accessed 14 August 2021
35 ibid 627.
36 Deepak Joshi, ‘India’s Taxation Policy is Behind the COVID Curve’ The WIRE (New Delhi, 19 May 2021) <https://thewire.in/government/india-gst-covid-19-relief-materials-solutions > accessed 14 August 2021
37 Black Marketing Act 1975, s 3.
38 Deepak Joshi, ‘India’s Taxation Policy is Behind the COVID Curve’ (n 36).
39 Seena Twayana, ‘What is the difference between NO VAT and ZERO VAT’ Kaagmandu Magazine (Kathmandu, 3 September 2019) <https://www.kmagz.com/what-is-the-difference-between-no-vat-and-zero-vat/ > accessed 14 August 2021
40 Editorial, ‘1 year later: Impact of GST exemption on Sanitary Napkins’ (Saral Designs) <https://saraldesigns.in/1-year-later-impact-of-gst-exemption-on-sanitary-napkins/> accessed 14 August 2021
42 Jorene Ooi, ‘Bleeding Women Dry: Tampon Taxes and Menstrual Inequity’ (2018) 113 Nw U L Rev 109 < https://scholarlycommons.law.northwestern.edu/nulr/vol113/iss1/3/ > accessed 14 August 2021
43 Suzanne Herman, ‘A Blood-Red-Herring: Why Revenue Concerns Are Overestimated in the Fight to End the “Tampon Tax”‘(n 13).
44 Bridget J. Crawford, ‘Tampon Taxes, Discrimination and Human Rights’ (n 5) 531-534.
45 ibid 512-513.