Severe resource constraints in the wake of the financial crisis have made the provision of health care more difficult than ever.
Health professionals need to be part of the debate around how our health services are funded.
The health gap between rich and poor
We know that levels of health are far worse in more economically unequal societies.
Under-financed and dysfunctional heath systems and unhealthy consumption behaviours are just some of the ways that this inequality stretches across the individual, society and the economy.
To the degree that health professionals and policymakers are interested in pushing back against the growth of inequality, it is critical to understand the impact and scope of tax policy – one of the more concrete policy levers affecting inequality.
This page describes the function of tax, its relationship to health and ways to use tax in promoting greater health equality:
The Functions of Tax (The 5 R’s)
It is important when people are asked to pay their taxes that they know what tax is for. There are 5 good reasons for paying tax:
- Raising revenue
- Repricing goods and services that are incorrectly priced by the market e.g. alcohol, tobacco, carbon emissions etc.
- Redistributing wealth and income
- Raising representation by encouraging participation in the democratic process
- Calibrating the economy through financial regulation
The Tax Gap
Healthcare is a common good, not a market commodity. Like all common goods, healthcare is funded by public revenue – and tax is one of the most important sources of this. If tax revenue is reduced – for whatever reason – then a government will not have enough money to provide social services, including health. Important ways that tax revenue is curtailed include:
- Insufficient taxes paid by the right people (tax avoidance and evasion)
- Uncollected taxes (tax havens)
- Taxes are too low for the wrong people (tax structure)
The current tax system – both nationally and globally – promotes the collapse of tax revenues. Thus the associated problems of tax avoidance and evasion, capital flight and tax competition are behind the ever-decreasing public budget available for public goods. The resulting tax gap is the reason why there is not enough money to fund things like the NHS – not that it is an inefficient health system.
The Social Role of Tax
A tax is a payment made to a government for which no direct benefit is provided in exchange e.g. a payment to government required by law based on a percentage of income earned from an employment is a tax.
The use of tax by states leads to three important outcomes:
- A common interest: A government that is dependent on tax revenue is incentivized to promote the prosperity of its citizens.
- The state apparatus of public bureaucracy, population data collection, public sector planning and resource allocation becomes possible though the development of tax administration.
- Accountability and responsiveness are encouraged by a citizenry empowered to make claims of their government through taxation.
Thus tax has been one way of expressing and sustaining the kind of centralized authority that led to the development of the modern state.
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