Why national policy must address tax impact on healthcare

The national policy draft on incentivising the healthcare industry is built on four pillars of fostering an enabling environment to attract private capital, driving public-private partnerships, government funding, and technology adoption.

But key sector stakeholders think the policy should not overlook other pertinent issues like incentives for players and the impact that uncritical taxes on imported medical products leave on the final cost of care.

Pamela Ajayi, president, the Healthcare Federation of Nigeria (HFN), identifies custom duty challenges faced by importers of medical consumables due to inaccurate product classification as a burden that inflates the cost of medical equipment and treatment prices.

The policy, unfortunately, fails to present actionable plans on how the government aims to reduce out-of-pocket expenses borne by individual patients who contribute 77 percent of private spending on healthcare in Nigeria, she says.

Data from the Institute for Health Metrics and Evaluation show there is a disproportionately low contribution of public funding to the total health expenditure as insurance penetrations drag and leave individuals with the largest burden.

“Some of the solutions that could be proffered to reverse the brain drain challenge among us includes private sector incentives and training,” Ajayi notes during a meeting with the Federal Government to lay bare the struggles of private sector players.

“There are a lot of issues. Some border on policy and bills needed to be passed, while others border on financials. For example, some of the incentives that our members feel are required in the healthcare sector. We also have some issues in terms of regulation, taxation, and other challenges that our people are experiencing,” she states.

Current incentives in the sector from the Nigeria Investment Promotion Commission (NIPC) basically cover income tax relief, import duty concession, rural investment allowance, investment tax relief, exemption from value-added tax, and replacement of obsolete plants and pieces of machinery, Emeka Offor, chief executive of the commission, states.

Companies are granted tax relief for up to three years, which can be extended for over a year or two, but they have to be involved either in the manufacturing of drugs, pharmaceutical chemicals, or the production of dental equipment and supplies. Importation of medical equipment classified as lifesaving gets import duty concession while companies providing medical services listed as a qualifying activity for VAT exemption also get relieves.

Akin Abayomi, commission for health, Lagos State, in a presentation took a contrary stance, saying there should be an increased focus on stimulating the economy instead of offering tax breaks, saying Nigeria does not collect enough taxes to deploy breaks.

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But Ajayi states that there are pressing problems. There is currently no provision in the industry for players to access foreign exchange at the official rate of the Central Bank of Nigeria.

The policy omits the manpower needs of the industry, does not cover the engagement of expatriate staff and knowledge transfer to indigenous experts, nor does it have special plans to incentivise returning specialists in the diaspora.

Ajayi in her presentation explains that the response to healthcare problems also has to be holistic enough to develop a robust plan on the protection of intellectual property to ease attraction of funds and boost innovation in the healthcare industry.

She further notes that the gaps in the country’s healthcare delivery system require public-private partnership. It requires effective enforcement of the policy, monitoring, sanctions for defaulters, and adequate compensation for those who follow through.

Meanwhile, Ibrahim Yahaya, minister of state for health, speaking on the issue of incentives for healthcare workers as a measure to stem brain drain, says the country needs to have a new conversation to determine how to compensate workers, saying the current template of salary structure cannot allow competition with rates in other countries.

“As legislators, we have tried to ensure the hazard allowance is increased and we have ensured it is in the budget. The training allowance for resident doctors is also being implemented. Overall, we need to agree as a nation that this category of workers is a priority and should be paid separately,” he states.