Dying young (VAT on Medicines)
I was talking to a friend, whom I was supposed to meet for brunch at her office. She called to say that she couldn’t make it, because she had to take her godson Timmy to the hospital emergency room (ER). The boy, a lad of six, is the only child of her family’s long-time household helper, and was in the throes of a nasty allergy attack—his right eye was so swollen that his poor face looked like a smaller version of Manny Pacquiao’s mug after a particularly vicious sparring round.
They spent three hours at the ER, and the total bill—which my friend paid, of course—came to around P2,000, what with the steroids, antihistamines, a hypodermic syringe, and goodness-knows-what-else. I can think of better places to spend two grand, but c’est la vie!
Little Timmy’s state of affairs reminds me of the situation of two young friends of mine in my neighborhood: Cyrus, 10, and Miggy, seven. Both of them have asthma, and their parents are fixtures at the corner drugstore, Farmacia Marie Vi—we all know the drill: inhalers, steroids, cough medicine, etc. Thinking of Cyrus, Miggy and my friend’s godson makes me think that their situations reflect the circumstances of millions of children and young people, all plagued with childhood illnesses that may eventually become chronic ailments that require lifelong maintenance medication. And if you combine that situation with the fact that at least half the population of our country lives at, or near, the poverty line—well, it’s disheartening, to say the least. Those three little boys are lucky, in the sense that, as in the case of Timmy, there’s a benefactor who can help foot their medical bills; or, as in the case of Cyrus and Miggy, their parents earn enough to support their medical needs. But how many other children or young persons will have gainfully employed parents or generous benefactors who will help them survive serious childhood ailments? And how many parents will have open-handed relatives, friends or bosses who will help them meet their children’s medical expenses?
The classic Department of Health slogan—“Bawal magkasakit!”—rings especially true in these economically challenging times, when the cost of medicine has become something of a nightmare. Of course, there are such things as Senior Citizen discounts, but let’s face it, the Philippines has a considerably young population, and the children and young people who take maintenance medications certainly don’t have any special discounts they can avail of. Ditto for the working people and the middle-aged, who need such things as hypertension drugs, hyperacidity medicines, diabetes medications, and every other pill, capsule, tablet or syrup that someone, somewhere in this country will need to stay reasonably healthy. Bottom line: It’s ridiculously expensive to get sick in this country; in fact, some people have been wont to say that if you get sick in the Philippines and you don’t have any money, you might as well kiss your time on this earth goodbye. From where I sit, opinions like that are eloquent proof that it’s high time the government did something to help Juan de la Cruz to maintain his health.
That something, at least from where I sit, is to either remove the VAT—or reduce the VAT rates—on medicine. It’s an unhappy fact that the VAT is an indirect tax, and because of this, there’s really nothing to stop sellers from passing on the tax to the ultimate buyer of a product. And before anyone breathes the words “input tax” and “output tax,” we should all remember that the consumer, as the “end user” of a particular kind of medicine, can’t claim input VAT on his purchase. In other words, the diabetic who buys his insulin at his regular drugstore branch will have to absorb every additional peso in price that the drug accumulates each and every time the VAT is imposed on it as it goes through the manufacturing process, from the minute the raw ingredients leave the suppliers’ laboratories to the very second the insulin bottle arrives at the drugstore. The plain and simple truth is that the VAT on medicines inflates the prices of medicines, and for a population trying to survive in a developing economy, every peso that gets added to the price of medicine is all the more keenly felt.
I recall that just a few months ago, a bill was filed in the Senate and the House of Representatives exempting medicines from the VAT; it is not the first time that such a bill was filed, because I recall that there were previous attempts to pass legislation that would exempt medicines from the VAT.
Friends in the know tell me that this present bill is still pending in those hallowed halls of legislation, though when—or if—it will be passed into law is anyone’s guess. The government is understandably wary of any “revenue-eroding” legislation, as the term goes, but I’m hoping that in this case, the powers that be will realize that exempting medicines from the VAT will be a godsend to millions of Filipinos from all walks of life. For many of our people, it’s hard enough to earn a decent living that’ll help to keep body and soul together without having to think about expensive medications.
It’s worth mentioning that across the seas, a number of countries have already reduced their VAT rates on medicine, or have exempted medicines from the VAT altogether. Canada, in particular, imposes a zero VAT rate on drugs prescribed or dispensed by medical practitioners, and on a wide range of medical services and equipment. A quick glance at the VAT rates employed by the 27 member states of the European Union shows that 18 of the members apply VAT rates lower than 10 percent; three of them, in fact—Ireland, Malta and the United Kingdom (UK)—impose a zero VAT rate on medicines, while France imposes a modest 2.1 percent. What’s more, 18 member states also impose VAT rates of less than 10 percent on medical equipment for disabled persons—Ireland and the UK make use of a zero percent VAT rate. Hmmm … me thinks the Brits know something we don’t.
One might argue, of course, that the UK is a highly developed economy and can afford to exempt medicines from the VAT. But should people really be compelled to pay so much to stay healthy? Reducing—or repealing—the VAT on medicines would free up more disposable income for other necessities such as food and housing, and would allow families to spend more on other vital needs, such as education. It’s not a wide stretch of the imagination to say that helping people to improve their quality of life—and to safeguard their health—makes for a more productive and active population and, ultimately, a faster-growing economy. Life is stressful enough as it is— people should not have to be so anxious about whether they can afford to stay healthy, on top of all the other worries of everyday existence.
Next year is an election year, and if any would-be candidates are reading this column, then I hope they’ll seriously think about including the exemption of medicines from VAT in their election platform. It’s definitely something that will win them votes with the public, but more importantly, it is something that I truly believe is the right thing to do. When the greater majority of a country’s population subsists on a very modest income level, compassion and a sense of humanity dictate that the state assist them as far as possible in improving their quality of life. One sure way to accomplish this goal is to ensure that the prices of such vital goods as medicines and medical equipment are kept as reasonable as possible, an objective that can surely be achieved by reducing the taxes and tariffs on these items. For centuries, taxation was perceived as an instrument of oppression—do we really want this impression to hold even into the 21st century, with all its enlightenment and democratic principles? Does the government really want it said that in its attempts to raise revenues for economic development, it is ultimately sacrificing the health and well-being of its people?
I’m reminded of one of my favorite movies, “Dying Young,” which told the moving story of a young man, Victor Geddes (Campbell Scott), his battle against leukemia, and the courage he found in the love and strength of his friend and nurse, Hillary O’Neil (Julia Roberts, several years before “Pretty Woman”, but certainly a pretty woman even then). Victor Geddes, however, had a wealthy father who paid for his expensive chemotherapy treatments—that, plus the support of the woman he loved, made him determined to fight his illness. How many young people with serious illnesses, however, have wealthy parents who can pay for their treatments and medication? I think we all know the answer to that.
It’s my hope, therefore, that the government will do the right thing and repeal—or reduce—the VAT on medicines, and give millions of Filipinos fresh hope for a tomorrow made more optimistic by health regained and restored. Otherwise, “Dying Young” might not be just another touching story on the silver screen, but the fate of thousands upon thousands of young Filipinos across the country who desperately want to live productive lives and are only waiting for a helping hand from what they hope will be a compassionate and understanding Government.
Please don’t let them down.
(The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a senior partner of The Tax Offices of Romero, Aguilar & Associates and member of the MAP National Issues Committee and the MAP Tax Committee. Feedback at [email protected]. For previous articles, visit.)
