26 November 2003

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Taxes for healing the wounds

By Matthew Vella
The 2004 budget specifically earmarked tax and excise increases as a source of dedicated revenue for an ailing health sector. With the exorbitant Mater Dei project yet to achieve completion, this year should see at least Lm26 million from VAT and tobacco directly funnelled into the NHS.
Finance and Economic Affairs Minister John Dalli has introduced a system of dedicated sub-accounts within the Consolidated Fund so that tax receipts can be wholly directed to these sub-accounts. The first accounts will be: Tourism and Culture Account; Roads, Construction and Maintenance; Health; and Environment and Embellishment. The accounts will be managed by a Finance Ministry official, the Permanent Secretary responsible for the particular activity, and an MCESD representative.
Medication Bill
Most certainly, the main items of the budget for the health sector include a streamlining of expenditure mainly directed to those who theoretically are more liable to use the state health system and those who can afford paying for it. This is especially true in terms of the proposed means test for holders of ‘yellow card’, which entitle certain chronic sufferers to free medicine for such diseases and conditions as hypertension, chronic asthma, rheumatoid arthritis, renal failure, epilepsy, Parkinson’s Disease, MS, motor neurone disease, schizophrenia, haemophilia, glaucoma and HIV.

This is expected to cut off a large chunk off the medication bill, whilst allowing for flexibility for patients with certain conditions. The ‘pink card’ holders which are already means tested to ascertain they are eligible for social benefits, will remain eligible for free medicine although a medical audit will be now be carried out.
Medical Association of Malta President Dr Stephen Fava said the measures addressed to the health service were positive: "In principle we agree with these measures especially since patients will now know what they are paying for. We agree with the creation of different accounts within the Consolidated Fund. Our health service enjoys high standards and we have to ensure that the sector can remain sustainable without a degradation in the level of services offered. Certainly it has to remain accessible to everyone. However the first step is to curb abuses. There are always a small number of patients who abuse of the service repeatedly, to the detriment of those on the waiting lists and in general for taxation."
Dr Fava said the means testing on yellow card holders was as yet debatable since there had been no disclosure on how this testing will be carried out, since these not always reflect the real cost of the burden. Fava said the MAM would like to see more consultation on the MCESD when it comes to health matters, although these are already represented on the MCESC through the Confederation of Maltese Trade Unions.
Tobacco excise
The increase in tobacco excise this year was of 16 per cent, with king-size 20s increasing from Lm1.25 to Lm1.45, whilst standard 20s will be sold at Lm1.30. Rolled-up tobacco has increase to Lm26.70 per kg and cigars will now carry an excise of Lm6 for every 1,000 cigars. This increase is expected to generate an additional Lm5 million for 2004 which will be channelled to the health account.
Mater Dei’s shadow
The singularly telling sign of the overburdened health sector, compounded by the trudging campaign for the completion of the costly Mater Dei hospital was the increase in VAT from 15 per cent to 18 per cent, except on zero-VAT rated goods and minimum VAT goods and services. The increase in three percentage points is expected to generate Lm21 million, all to be channelled to the health account. Dalli contends the increase in the VAT will bring about a "once-only increase in inflation of around 1.9 per cent" which will not impact significantly on inflation "when this is at the lowest for these last years and when levies that are still in place on food items will be wholly removed next year, which will also push down prices."
Private insurance holders
In order to streamline health resources, health centres are expected not to remain open during nights and on Sundays. A more courageous step in health reform will be he payment for those NHS services by those with private medical insurance, victims of accidents who are covered by insurance and foreigners which are covered by insurance, irrespective of any bilateral treaties covering free health services.
Dr Stephen Fava agrees with the measures: "What we have seen as favourable was certainly having foreigners pay for their health services. Before it used to be paid for by the Maltese taxpayer. These travellers are insured before they leave their country, so it should be their insurance to pay out health costs."
As from 2004, the elderly domiciled at government institutions or to private homes under the private-public partnership agreement will start contributing 80 per cent of their pensions to the government. Previously this was 60 per cent, and calculated from a taxable pension. Moreover, this contribution will also include 60 per cent of other income sources such as interests on deposits, with a maximum ceiling of Lm600. However in this case, the money will proceed directly to the Consolidated Fund. The increase is set to cover a general increase of accommodation, alimentary and medicinal services.
Pensioners have also been given a 5c increase on their computed cost of living allowance, which is calculated on the basis of a price index for pensioners instead of the two-thirds of general COLA. Since this year the computation resulted in 5c less than the two-thirds of the actual COLA, pensioners were awarded 50c a week.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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