UPDATED: Remove VAT on prescription pharmaceuticals – SLMDA

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UPDATED: Remove VAT on prescription pharmaceuticals – SLMDA
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The association said removing VAT on prescription pharmaceuticals will afford the government a “unique opportunity to stabilize this aspect of the delivery of care”.

The St. Lucia Medical and Dental Association (SLMDA) has added its voice to calls for the removal of Value Added Tax (VAT) on prescription pharmaceuticals in light of what the association describes as “the steadily increasing” cost of accessing and delivering health care.

The association said removing VAT on prescription pharmaceuticals will decrease the cost of medication and will afford the government a “unique opportunity to stabilize this aspect of the delivery of care”.

“Though the increase in the cost of health care has many contributing factors, we cannot ignore the implications of the increasing cost of prescription pharmaceuticals now compounded by the double taxation through the application of the Value Added Tax,” the SLMDA said in a statement.

The association explained that patient compliance with medication is essential to the prevention and treatment of disease therefore the impact of increasing the cost of medications with the addition of VAT to prescription pharmaceuticals is a reduction in patients’ ability to afford these medications.

“In health care, prevention is not only better than, it is also far cheaper than cure. Reducing the cost of medications will foster better patient compliance and substantial cost savings within the health sector in the long run,” the association noted.

“At this time, we believe that the government should focus its efforts towards the implementation of UHC to facilitate increased access to essential health care and the reduction of financial barriers such as VAT,” the association added.

The SLMDA is just one of several non-governmental organizations – including the hotel and tourism association, manufacturing and opposition political parties – that have called for the full removal of VAT on particular products and services, a delay in its implement or an incremental approach to the calculations of the combined tax.

The VAT came into effect Oct. 1, 2012, but not all products and services attract the tax.

The main Opposition United Workers Party (UWP) has criticized the government for imposing double taxation on medicines with VAT, but government immediately denied this through a statement, explaining that import duty will not be charged on medicines for the next four years as a result of an agreement with CARICOM.

The government explained: “Mindful of the likely impact of VAT on the prices of medicines, the government took a major step to cushion the retail price of medicines. Prior to the implementation of VAT, medicines attracted an import duty of 10 percent followed by five percent consumption tax. The government of St. Lucia secured the agreement of CARICOM to suspend the Common External Tariff on pharmaceuticals for a period of four years from May 1, 2012 to April 30, 2016. This means that unlike other imported goods, import duty will not be charged on medicines for the next four years, so VAT will not be imposed on top of the import duty that medicines attracted in the past.”

The government called this four-year break “a period of adjustment for all” but pointed out that “retailers may well have previous stock on their shelves at old prices with the old tax rates”.

But the UWP responded swiftly to this statement, describing it as a “trump card to quell the demands of St. Lucians”.

The UWP said: “Notwithstanding the latest statement from the government, there still remain lingering concerns which are linked to the imposition of VAT on medication. Like many other products which fall within the transition period of VAT implementation, St. Lucians may have to contend with higher cost on medication for the next six to eight months as a result of ‘old stock’ which attracted both import and consumption tax. This would effectively cut into the four-year period of reprieve referred to by the government.

“Further it must be recognized that the arrangement with CARICOM is a short-term message, which means that the higher cost on medication would re-emerge in time. Whereas the Government’s statement referred to an arrangement from CARICOM as relates to import duties, it did not indicate when this arrangement would take effect.”

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