A fairer tax system, the answer to health funding gap

EASTERN and Southern Africa (ESA) countries continue to face critical health budget deficits while sources of income to fund the sector remain subdued, experts have said.

By Nyasha Chingono

While there is agreement that universal coverage of health is a human right, countries still fall short of the Abuja Declaration which calls on states to spend 15% of the total domestic budget on health services.

The Covid-19 pandemic, which caught many countries unprepared, exposed lack of investment in health sectors across the region while widening the gap between the “haves and have Not’s.

According to Rosie Bistoquet, Seychelles National Assembly and Chair SADC PF Standing committee on HIV/AIDS and SRHR, the pandemic exposed ‘brutal health disparities’.

The Covid-19 pandemic exposed the brutal health disparities and their associated structural components,” Bistoquet told delegates in her opening comments during the second day of a conference hosted by the Regional Network for Equity in Health in East and Southern Africa (EQUINET), themed ‘Reclaiming the State’.

Bistoquet said the region is facing worsening health disparities, especially among disadvantaged and marginalised groups.

“There is a clear and established relationship between poverty and socio-economic status. Those with low incomes have poorer health and low life expectancy,” she said.

“If health is a fundamental human right, why are there inequalities in accessing health care in our region?”

She added that health inequalities can be avoided while reiterating the importance of the contribution of political voice in realising health rights.

Of tight budgets and widening funding gaps 

The funding gap for health services in ESA remains wide and of critical concern, as the region battles to meet its duties for universal access to services in a sector responsible for millions of lives.

Governments have also found themselves grappling with basic budgeting problems as economies continue to face headwinds of the Covid-19 pandemic.

Dr Rene Loewenson, Training and Research Support Centre (TARSC) and EQUINET SC traced health inequalities and growing funding gaps from the cuts introduced in the Economic Structural Adjustment Programme to wider neoliberal policies affecting health.

“We have witnessed reversal when budgets for key public services have been cut. Essential public services have been commodified and commercialised.”

Tracing the performance on health financing in 16 ESA countries, the evidence shows that some governments’ have increased expenditure on health systems, but for many the funding has fallen or fluctuated.

By 2018, no country had attained the 15% of domestic government spending on health committed to in Abuja in 2021, although some countries (Lesotho, South Africa and Botswana) were close to it. Seven ESA countries spend half or less than the 15% committed to by heads of state. Between 2000 and 2019, five countries (the DRC, Seychelles, South Africa, Botswana, and Mauritius) consistently increased their share of health spending in budgets, but others showed either declines or fluctuating spending.

The sector remains underfunded, Loewenson told delegates.

“When we look at the GDP expenditure per capita relative to the USD52/capita for a basic service package calculated by countries in the region, or the $114 per capita needed for a more comprehensive health system estimated from World Health Organisation (WHO) data, we see a level of underfunding in the public health sectors in most countries in the region,” she said.

“The public health finance gap is quite significant.”

The conference heard that the annual funding gap for ESA countries to deliver on universal health coverage commitments is about US$36 billion, or between US$28 and US$84 per capita for a basic or comprehensive respectively.

With this funding gap many services collect money from fees, formally or informally, but for many this out-of- pocket expenditure for health services is high and impoverishing, further increasing inequalities.

Taxes as a source of health funding, narrowing the gap

Chenai Mukumba of Tax Justice Network Africa reported that taxes are a progressive funding source for health services in ESA countries. Direct taxes on income and wealth raise resources equitably and redistribute income towards those with greatest health needs.

The WHO has unequivocally stated that universal healthcare services funded through taxation and free at the point of access are the most effective, equitable ways of funding and delivering public health services as well as delivering on health care rights and state duties.

However African countries tend to have a low GDP to tax ratio., a measure of tax capacity. Mukumba noted that the UN Economic Commission for Africa estimated that countries should have a tax capacity of 20%. In 2019, ESA region countries had a reading of 18.8%, translating to an annual tax of $34 per capita.

Tax losses also arise due to global tax rules and profit outflows, with an estimated loss to tax revenue in the ESA region of US$7.6bn annually.

Mukumba also outlined how global tax rules unfairly prejudice ESA countries of tax revenues by using a system that allows multinational companies to locate taxable income in low tax countries outside the region.  The combined annual tax losses from these sources alone is about US$34bn.

“Comparing the total annual tax loss with the shortfalls in public sector health financing, the total of US$34bn would come close to completely financing the region’s US$36bn shortfall in public sector health financing for a comprehensive health system, including, using estimates from WHO, a minimally adequate set of interventions and the infrastructure to deliver them,” Loewenson said.

The evidence indicates that it is possible to meet the health financing gap for public sector health systems in the region through adequate funding from progressive taxation, with implications of COVID-19 having drawn socio-political attention to the need for investment in public sector health systems.

At a global level, Africa remains marginalised when negotiating tax regimes that affect taxation of multinational activities, with the global tax framework set by the high income countries in the Organisation for Economic Co-operation and Development (OECD)

“The African Ministers of Finance have called for a fairer global tax framework, but say that their proposals have been largely ignored.”

Equinet proposed: “We need to support with health evidence the African Finance Minister negotiations for global tax systems reforms.”

“We need to move tax discussions to a UN sitting, where African governments have a seat at the table,” Mukumba said.

Dr Martin Matu of the East Central and Southern Africa (ECSA) Health Community said the Covid-19 pandemic had heightened calls for a stronger and better funded health system.

“The Covid-19 pandemic showed us that there is a need for a health system that is resilient and that protects everyone,” Matu said. He proposed: “Reorganising the delivery of the public healthcare services by establishing team practices and strong link with community and public health.”

This includes more investment in primary health care, he said.

“Investing in primary health care for universal health coverage boosts capacities to prepare for and respond to health emergencies,” he added.

The pandemic has made clear that underfunding public sector health systems is a risk for all, while the evidence presented at the conference indicated that both heath and finance sectors could address critical tax losses to meet the funding gap.



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