Change Domestic Taxation Policies to Increase Available Resources for Health

| April 27, 2013 | 0 Comments
Leaders of Liberia, Indonesia, and the UK met to discuss healthcare funding options on a domestic level.

Leaders of Liberia, Indonesia, and the UK met to discuss healthcare funding options on a domestic level.

After several decades of disappointing results of government-based health improvement initiatives in the developing world, advocating and implementing market-based solutions to country- and region-wide health problems has become a popular alternative. However, most developing countries’ health systems are run by their governments and rely in some capacity upon international development aid and, making market-based solutions difficult to implement.

The World Health Organization (WHO) and major non-governmental organizations (NGOs) like Oxfam play an important role in developing solutions for funding health improvement in developing countries. In September 2008, the WHO launched the Taskforce on Innovative International Financing for Health Systems, as the global financial crisis was increasing in severity, which led to additional uncertainty about the ability of the international community to raise funds for health. The Taskforce identified several opportunities for financing developing-world health systems in a document called “More Money for Health, and More Health for the Money.” Most of their recommendations, however, take the form of north-to-south transfers of finances that replicate much of what has been done on a supra-national policy level and focus on international monitoring and evaluation and increasing international donations to developing countries’ health systems.[i]

Alternatively, a 2010 document published by the WHO called “Responding to the Challenge of Resource Mobilization – Mechanisms for Raising Additional Domestic Resources for Health” suggests that developing country governments can change their taxation and revenue policies to raise funds for health, and thereby mitigate their reliance on international NGOs. As we in the United States just “celebrated” Tax Day on April 15, it seems appropriate to highlight some of their tax-focused solutions.

The WHO document suggests that the implementation of Value Added Taxes (VAT) with a share of the revenue earmarked for the health sector, and health-specific taxes on large corporations could have medium to high fundraising potential and are likely pro-poor.[ii] Oxfam has suggested that if government leaders were to close tax loopholes that enable legal tax-dodging, some $189 billion could be raised in taxes internationally each year.[iii] Oxfam draws attention to the $1 billion in “illicit finance” that has flowed from Liberia each year for the past ten years, which is “twice the average amount it received in aid and equivalent to two thirds of Liberia’s GDP in 2011” and could, theoretically, be taxed for additional revenue to improve health care systems, resources, and access.[iv]

In lieu of increasing international aid to developing countries or implementing market-based solutions for state-run health systems, governments in developing countries should consider improvements to domestic methods of raising revenue. With individuals like Liberian President Ellen Johnson Sirleaf, UK Prime Minister David Cameron, and Indonesia’s President Susilo Bambang Yudhoyono focused on using these methods for health improvement, buy-in from other global leaders should be forthcoming.

[i] Taskforce on Innovative International Financing for Health Systems. More Money for Health, and More Health For the Money. World Health Organization Bulletin 2008.

[ii] Stenberg, Karin; Riku Elovainio; Dan Chisolm; Daniela Fuhr; Anne-Marie Perucic; Dag Rekve; Ayda Yurekli. Responding to the Challenge of Resource Mobilization – Mechanisms for Raising Additional Domestic Resources for Health. Health Systems Financing: The Path to Universal Coverage. World Health Organization World Health Report Background Paper 13 (2010).

[iii] Hooper-Box, Caroline; Monique van Es; Stephen Hale; Caroline Testud. Closing Tax Loopholes could Help End Global Hunger. Oxfam Online. Published 30 Jan 2013. Accessed 13 April 2013. < pressroom/pressrelease/2013-01-30/closing-tax-loopholes-could-help-end-global-hunger? utm_medium=3u3&utm_content=redirect>.

[iv] Ibid.

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Category: Development, Policy

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