Tax Exemptions: A Catalyst For Demand And Supply Of Plastic Sanitation Products

However, most (88 percent) rural households with toilets have unimproved sanitation facilities that expose users to fecal matter. The prevalence of unimproved sanitation facilities is due to the persistent lack of affordable or desirable options to construct an improved toilet. USAID, through the Transform WASH (T/WASH) project, is collaborating with other development partners like UNICEF to support the Government of Ethiopia (GoE) in addressing this problem by introducing innovative, low-cost sanitation products (such as plastic pans and slabs) in Ethiopia. These products are, at present, exempted temporarily from import duties and domestic taxes because they are procured by agencies such as USAID and UNICEF. But the retail price will increase significantly when the private sector fully assumes procurement and distribution because of applicable taxes and tariffs. The GoE is considering a policy of fiscal exemptions (import duties and domestic taxes collectively referred hereon as tax exemptions) to improve the affordability of a range of WASH products, including plastic sanitation products. Improving affordability could potentially contribute to the GoE’s ONE WASH National Programme (OWNP) Goal 2, i.e., a 52 percentage point increase in improved rural sanitation coverage. However, the GoE will likely consider tax exemptions for a limited period because it aims to establish a local private sector supply of WASH products, as per OWNP Goal 5, and the broader Growth and Transformation Plan (GTP) II Section 4.2. USAID tasked the Water, Sanitation, and Hygiene Partnerships and Learning for Sustainability (WASHPaLS) and T/WASH projects to assess the potential impact of tax exemptions to inform the GoE’s decision-making. The impact assessment makes a compelling case for implementing the policy by demonstrating that it can contribute to the GoE’s WASH goals, and the economic benefits significantly outweigh the costs. For further details on select methodologies used in this assessment, please read the Technical Supplement.