OPINION> Commentary
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OPINION> Commentary
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Make medicine and nursing totally tax-free
By Satoru Hosoda (China Daily)
Updated: 2008-10-21 07:49 With the medical system in an unhealthy state, support is growing for reforms to prevent the faltering sector from collapsing. But exactly how the government obtains the necessary funds to fix the system remains a point of debate. While some commentators see an increase in consumption tax as an option, I don't agree. If the consumption tax rate were raised under the existing taxation system, it would threaten the survival of medical institutions.
Medical service fees paid by patients are exempt from consumption tax as long as their treatment is covered by health-care insurance. The consumption tax was introduced in 1989 by the cabinet of Noboru Takeshita. In 1997, the administration of Ryutaro Hashimoto raised the tax rate from 3 percent to 5 percent. Both administrations promised they would "not impose taxes on life and education", and medicine was left tax-free. It is true that medical institutions do not receive consumption tax from patients. However, practically everything hospitals buy-including drugs, medical equipment and ingredients for hospital meals - is taxed. In effect, hospitals are shouldering consumption taxes for all of their purchases as an end consumer. The hospital I work at is medium-sized, with fewer than 200 beds. Similar hospitals can be found all over the country. Based on my calculation, the hospital paid about 70 million yen in consumption tax for fiscal 2007. The amount was equivalent to 1.3 percent of its annual income of approximately 5.4 billion yen. From a business standpoint, the figure is quite substantial. If the consumption tax rate is raised to 10 percent under the existing taxation system, the burden would double to 140 million yen. At 15 percent, it would triple to 210 million yen and make it impossible for the hospital to stay afloat. Medical treatment fees paid to hospitals under the health insurance system had been raised to cover such increased costs until 2002, when the government decided to curb expected natural increases in social security expenses by up to 220 billion yen a year. Medical treatment fees were lowered in fiscal 2002 and fiscal 2006. As a result, hospitals no longer have the means to cover their growing costs, and the financial standing of many medical institutions is deteriorating.
What, then, can be done to rectify this situation? In the export industry, sales from exported products are subject to a consumption tax rate of 0 percent. Effectively, they are exempt from taxation. In addition, exporters are reimbursed for the full amount of consumption tax paid on their purchases, such as materials for the exported products. According to Hiroaki Urano, a professor specializing in tax administration at Rissho University's faculty of law, Toyota Motor Corp. received a tax refund of 286.9 billion yen in fiscal 2006. This is where financial resources that could be used to support the ailing medical system lie. Domestic demand is said to make up two-thirds of the nation's gross domestic product. Now is the time to boost domestic demand. The complete tax exemption for exports should be abolished and the consequent tax revenue should be diverted to medicine, nursing and education, making these areas tax exempt. The 21st century is said to be the age of a third industrial revolution in which key industries change hands from heavy and chemical industries to knowledge-intensive ones. In the age of heavy and chemical industries, roads and other transport networks were the social infrastructure into which investment was encouraged. But with knowledge-intensive industries, social security, including medicine and nursing as well as education, will form the social infrastructure that needs to be strengthened. This is all the more true given that these areas provide a safety net for national life. The author is a director of the Tokyo Medical Practitioners Association The Asahi Shimbun (China Daily 10/21/2008 page9) |
