Evaluating the Economic and Health Impact of Sales Tax on Personal Protective Equipment: A Cost-Benefit Analysis of Exemption

Abstract

Background: Personal Protective Equipment (PPE) is crucial for safeguarding workers across all industries. This paper investigates the rationale for and potential impacts of a sales tax exemption on PPE in Bhutan.
Methods: A cross-sectional, mixed-methods study combined survey data from 32 PPE suppliers in Thimphu with secondary data from the Ministry of Health and Department of Labor. The study assessed market prices, sales taxes, and workplace injury costs to evaluate the economic impact of PPE provision on employers and the healthcare system.
Results: This study reveals significant economic inefficiencies. While the government collects Nu. 19.3 million annually from PPE sales taxes, based on consumption by 41,428 workers, it simultaneously bears Nu. 650.1 million in injury-related healthcare costs for the construction sector. This yields a government cost-benefit ratio of just 0.03, indicating that tax revenue covers less than 3% of the healthcare burden. For employers, providing PPE at an average cost of Nu. 347 per worker proves 3,400 to 4,100 times more economical than bearing the average injury costs, which range from Nu. 1.2 million to Nu. 1.4 million per incident. Sector-specific analysis highlights particularly high risks for construction workers, with injury rates of 39% and associated costs of Nu. 23.6 million per 100 workers annually.
Conclusion: These findings indicate that the sales tax discourages investment in quality PPE, reduces compliance, and consequently increases the risk of workplace accidents and injuries. This leads to substantial healthcare expenditures and productivity losses. The study concludes with policy recommendations, including the elimination of the sales tax on PPE and the strengthening of enforcement mechanisms, including mandatory certification of PPE, to enhance occupational safety, reduce public healthcare burdens, and promote sustainable economic growth.

DOI: https://doi.org/10.24321/2455.7048.202509

How to cite this article:
Dendup P, Samdrup J, Dorjee S G. Evaluating the Economic and Health Impact of Sales Tax on Personal Protective Equipment: A Cost-Benefit Analysis of Exemption. Epidem Int. 2025;10(3): 3-11.