16 February 2022

Cost–benefit analysis of value-added tax exemption for soap in Madagascar

The latest Global Burden of Disease study (2019) identifies hygiene-preventable diseases as a leading cause of mortality in children under five. Madagascar is among the top 20 countries in the world with the highest rate of burden of disease attributable to inadequate hygiene in (Prüss-Ustün et al., 2019). Despite some progress realised during the Millennium Development Goals era, according to the latest Multiple Indicator Cluster Survey (MICS) (2018), only one in four people have access to basic hygiene, including handwashing. Despite the window of opportunity for increasing the practice of handwashing created by the COVID-19 pandemic, in 2020, 61% of households in Madagascar reported having difficulty purchasing basic products, including soap. Since the cost of soap is reported to be an important obstacle to practising handwashing, a value-added tax (VAT) exemption for soap may be a viable policy option to reduce the price of soap and to make it more affordable for households. However, country-sensitive evidence is required to understand the economic value of such an intervention and to determine the best course of action. The overall aim of this study is to assess the cost-effectiveness and costs/benefits of removing VAT on soap in Madagascar. To this end, we assessed the cost implications, health impact, and value for money of three intervention scenarios involving an elimination of, or a reduction in, the VAT applied to soap.