NYTimes: A Tax on the Sick
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NY Times Editorial
A Tax on the Sick
Published: July 4, 2006
Poor countries have long claimed that their people suffer needless sickness and death because the price of medicines is too high. They are right. But in many cases, part of the fault lies in their own policies, which jack up prices by taxing medicines, raw materials for drugs and medical devices.
Six years ago, African leaders pledged to stop putting taxes and import duties on bed nets. These nets protect people from mosquitoes that carry malaria, but are often slapped with high textile tariffs. In many countries, government taxes at least double the price that consumers pay for nets. In Tanzania, for example, the retail price dropped from $6 to $2.50 when taxes were eliminated, a huge help for families that live on less than a dollar a day. Usage of bed nets soared. But many governments that made the pledge have not followed through so far.
Adding sales tax or value-added tax to medicines is the most regressive form of taxation, and no country should do it. India charges up to 100 percent for medicines on its list of lifesaving drugs. Morocco's tariff is 12 percent. Nigeria adds a 20 percent tariff to the price of vaccines.
The United States, Singapore and Switzerland have proposed to the World Trade Organization that countries eliminate tariffs on medicines. This makes perfect sense. Only India seems to be using tariffs to protect local generic industries, a strategy that in some limited situations could indeed lower costs to consumers. The rest apply tariffs simply to raise revenue.
A study by the World Health Organization showed that governments make very little money from these charges, which can really squeeze the sick, as even a small tariff adds to the price that forms the base for later markups. Some countries probably retain tariffs only because their health ministries, which know how noxious they are, don't communicate with their finance ministries, which won't let go of any tax without a fight.
The proposal to the World Trade Organization would probably have gotten a lot more support by now if it weren't coming from Washington, allowing some countries to dismiss it as a way to help American drug makers while scoring public relations points. It may be that, but it's also a good idea.
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Claudio Schuftan
mailto:claudio@hcmc.netnam.vn