Tax and trade rules
On by Sorsha Roberts
Health systems across the Global South are short of cash. Yet the rules of the tax and trade systems are taking resources away from healthcare.
Taxation could be the most reliable way to boost government budgets so that more money can be spent on healthcare.
While aid money can be short term and unpredictable, taxation can provide governments with a steady flow of much needed income, free from any strings. It is a much more sustainable way of doing development, building accountability ‘down’ from states to their citizens, rather than ‘up’ to donors, and helping to break the aid dependency cycle.
A number of countries with strong health systems such as Sri Lanka, Malaysia, and Brazil, fund healthcare from tax revenues. Other countries such as Thailand, Mexico and Kyrgyzstan have pooled taxation with insurance contributions.
One of the problems is that many countries lack the infrastructure, systems and personnel to collect taxes effectively.
At the same time, vast sums of money are flowing out of countries to powerful companies and wealthy elites, as they dodge taxes by making full use of tax havens and legal loopholes. Poor countries lose $160 billion every year as a result of tax dodging.
A further problem is that countries often compete between themselves to keep tax rates low in a bid to attract foreign investment. But of course the damage this does far outweigh any short term benefits to their bank balance.
Global trade is worth billions – enough to bring jobs and livelihoods to many communities in poor countries. But from the cost of water to the availability of life-saving drugs, the rules of trade can also have devastating consequences for health.
Trade rules affect the price and availability of food, the jobs people can get and the availability and cost of medicines. These in turn directly affect the health of individuals, the health of their families, their chances of education and more.
Trade rules also affect the tax revenue available to governments to fund public services including health.
Wealthy countries argue that moving towards free trade – meaning less government intervention – is the best route out of poverty. But despite the fine words of world leaders about trade liberalisation, many trade agreements actually put the needs of big business above those of the poorest communities.
If developing countries stick together they can sometimes resist unfair deals, but with hugely varying economic strengths and interests, they are often picked off in smaller groups. This can lead to unfair trade agreements that undermine efforts to improve health and tackle poverty.
Intellectual property is one area where wealthy countries don’t push for free trade, but instead advocate government intervention. Why? Because these rules benefit their companies and economies. Powerful pharmaceutical companies, for example, want stronger patent protection for their drugs around the world, keeping prices high, to fund research and boost profits. But high prices mean developing country governments and health partners can afford fewer drugs and the poor may not be able to afford them at all.
There are also new pressures on developing countries to open up public services such as healthcare, water and sanitation, and education to free market forces, which also threatens to undermine public health.