Health risk tax on the cards
- Cigarettes, alcohol, fuel targeted as sources
Ministry of Health has proposed introduction of health risk taxes on alcohol and cigarettes as one way of revenue generation measures to complement resources it gets from its partners and the national budget.
The proposal to introduce health risk taxes is contained in a performance contract the Ministry of Health signed with President Peter Mutharika as part of the Public Service Reforms Pogramme covering the period February to December 2015.
The contract indicates that the proposal is currently at consultation stages. Besides the taxes on cigarettes and alcohol, the ministry also proposes introduction of a levy on fuel earmarked for health on the basis that road accidents are also contributing significantly to the trauma costs in hospitals.
Minister of Health Jean Kalilani, while not quantifying how much accidents contribute to trauma costs, said a task force on the issue is still working out how much government anticipates to collect from all health risks taxes.
Said the minister: “We are still working on that, but by end October, government would have finished all the ground work ready for implementation. The strategies have been tried in other countries such as Zimbabwe, Lesotho, United Kingdom [UK], and Australia and have been proven to work.”
According to the contract with the President signed on February 11 2015, government also intends to introduce an extractive levy on the mining industry to account for potential costs imposed on the health sector, in addition to the levy on communication.
Proposals to introduce user fees in hospitals have received support from health policy organisations which they say the move would ease pressure on the country’s health financing.
Malawi Health Equity Network (Mhen) executive director Martha Kwataine said in an interview the intentions are good as long as the money raised is being used for the intended purposes.
Said Kwataine: “We need to trace every penny in the health fund so that it is not being abused in any way by those collecting the funds, otherwise this is a good initiative.”
However, international non-governmental organisations (NGOs), notably Oxfam, has cautioned government that the taxes and levies would overburden the already poor Malawians.
According to the operational matrix, Cabinet papers on the establishment of the health fund will be prepared and submitted by end May and the minster will oversee the process, while the task force will have drafted the fund order by August waiting approval and completion in October.
In the K769 billion approved 2014/15 national budget, Parliament allocated K69 billion to the Ministry of Health. In contrast, the ministry’s total health expenditure was projected at K274 billion. n
