Taxes on Medicines. Margaret Ewen Coordinator, Global Projects (Pricing) Health Action International (HAI) Amsterdam. Background. High prices are a principal barrier to access to needed medicines
Coordinator, Global Projects (Pricing)
Health Action International (HAI)
High prices are a principal barrier to access to needed medicines
Domestic taxes are often the third largest component of the final patient price (after the manufacturers’ price and mark-ups in the supply chain)
Andrew Creese reviewed the role of domestic taxes and how they affect access to medicines
Source: HAI price database
Somecountries 0% VAT/salestaxon medicines eg. Colombia, Ethiopia, Malaysia, Pakistan
Low- and middle-income countries:
Study in severalAfricancountriesoninsecticide-treated bed nets foundthatpurchasesincreasedbyabout 27% whentariffs and taxes fell significantly (from 42% to zero for insecticide and from 40% to 5% for netting material).
Kuwait - 4% customs duty on medicines abolished in 2003
Kyrgyzstan – VAT and regional sales tax on medicines abolished in 2004
Pakistan – 12.5% sales tax on medicines was abolished in 2003
Peru - sales tax and VAT were waived for a range of cancer medicines and antiretrovirals in 2001
But.....in Peru there was little change in retail prices following the tax removal.
Must consider supporting regulation, for example on retail mark-ups, so patients benefit from the removal of a tax
Eliminate taxes on essential medicines and recoup the lost revenue by higher taxes on tobacco, alcohol, and unhealthy diet items
5% VAT alone yields just under $ 1 billion annually
Tobacco consumption reduces life expectancy 6 to 10 years and results in 1 million avoidable deaths per year
Excise tax of 38% on tobacco purchases. Doubling tax potentially adds $ 3.1 billion in revenue to government and save 3.4 million lives
Savings would allow a complete waiver of VAT on medicines and a $2 billion increase in government revenue
Reported to be introducing a tax on foods high in fat, sugar and salt
Revenue from “junk food” tax estimated to be $ 1.3 billion
Could be used to eliminate several times over the current 9% VAT on medicines which brings in a mere US$ 200 million on current annual total medicines expenditure of about US$ 2.2 billion.