Tax reform: health area wants specific rate – 04/05/2023 – Folha Seminars

The private health sector supports a tax reform, but defends a different VAT (value added tax) rate for each link in the chain.

The projection is that this new rate, discussed by the government and parliamentarians, will be 25%.

Important names in the sector point out that the unified rate, as proposed by the Executive, will reduce the demand for private health services and, consequently, fill the already saturated SUS (Sistema Único de Saúde).

The theme was discussed on Monday (3), in a seminar organized by Folha on the impacts of the tax reform on health. The event took place at the Museum of Image and Sound, in São Paulo, and was mediated by journalist Eduardo Cucolo.

The sector’s main complaint, according to the participants in the debate, is that a possible single rate of 25% would trigger, for example, an increase in the value of a consultation or medical procedure.

“Today, a doctor who works in an office has to pay a fixed INSS (National Social Security Institute) and a 3.65% rate of PIS and Cofins. With the implementation of the system, this rate goes to 25%, in a sector where inputs are negligible”, said Gustavo Brigagão, a tax lawyer who occasionally works with clients in the sector.

According to the VAT proposal, companies will be able to deduct their expenses when paying the tax. As a result, the less inputs used by doctors, clinics and hospitals, the greater the tax paid by them. In practice, however, according to the government, there will be no difference in the net amounts paid between those who consume less or more inputs, since the latter will have paid more taxes when purchasing the products.

For Fernando Silveira Filho, executive president of Abimed (Brazilian Association of the Health Technology Industry), it is necessary to zero the rate for the entire sector. “Many of these companies have been established, over the last 30 years, backed by a tax policy that has included several exemptions, so this proposed increase will close many of them,” he said.

Both he and Brigagão exposed tax data for 2018 from OECD countries (Organization for Economic Cooperation and Development). At the time, the vast majority of them adopted a differentiated regime for the sector or exempted it.

Another survey, based on data from consultancy EY and PwC, pointed out that, out of 118 countries, 90 do not tax the sector and 7 have a reduced tariff. The numbers were raised by LCA Consultoria Econômica, at the request of the National Health Confederation.

This Thursday (5th) a group of nine entities from the sector, including Abimed, delivered a manifesto to the deputies asking for differentiated treatment in the reform.

Rodrigo Octávio Orair, director of the Ministry of Finance’s Extraordinary Secretariat for Tax Reform, believes that the single rate will imply better redistribution of income in the country. He is part of the government group that provides tax data to the Executive and Legislative branches.

“Family budget surveys show that the poorest consume more than just food, such as personal hygiene items and cell phones, which are heavily taxed. In the end, when we take all these different rates that exist in Brazil today and simulate how it would look distribution with a uniform rate, the inequality of the system is reduced”, he says.

He points out that the country’s current taxation favors the richest, mainly due to lower charges in the service sector, such as health plans.

“Most of the 50 million people who have a health plan pay with great difficulty. And they do that because access to the public sector is deficient. We cannot see people who have a health plan as privileged”, says Giovanni Cerri, president from the Health Coalition Institute.

In the proposal for the creation of VAT, the government is studying the development of a tool to refund taxes paid by low-income final consumers. Cashback, as the device is called, would be applied to health, education and food expenses. In these cases, for example, a low-income patient would pay for the medical consultation and then have the portion referring to taxes returned by the government.

It is not clear, however, how this return would be made. Today, anyone, regardless of income, can deduct, in their Income Tax, their expenses with medical expenses and education – the latter with a limit of up to R$ 3,561.50.

Cerri is a disbeliever of the model. “Cashback is something very beautiful in form, but I am extremely suspicious that this mechanism works in Brazil, where much simpler things don’t work out,” she said.

The seminar was sponsored by Abimed (Brazilian Association of the Health Technology Industry).