Personal income tax payments to be linked up with accessibility of health care services

RIGA - Starting July 2013, personal income tax payments will be linked up with the accessibility of health care services, Health Care Minister Ingrida Circene (pictured) said during a debate organized by business portal Nozare.lv.

The data on tax payments for the previous year are compiled by July 1, which is why the new system cannot be introduced before that, explained Circene, adding that the system would be additionally discussed with the Finance Ministry yet.

The Health Ministry's compulsory health insurance concept will be submitted to the government at the end of July or the beginning of August. If the government approves the concept, a law on compulsory health insurance will be drawn up, similar to the laws in Estonia and Lithuania, as well as amendments to the related laws and Cabinet of Ministers regulations.

If the concept is approved by the government, Saeima could endorse the necessary amendments to the relevant laws by November or December, believes Circene.

In the minister's opinion, Saeima will support the concept as the ruling coalition has expressed support for it.

According to the concept, the accessibility of health care services for all economically-active residents aged 18 to 62 will depend on their personal income tax payments.

The "health tax" will be 5 percent of personal income tax rate, which currently stands at 25 percent. However, the parliament has approved reducing the personal income tax rate to 20 percent by 2015, therefore the proportion of tax revenue that should go to health care is to be discussed yet.

There have been many discussions with the Finance Ministry regarding income tax revenue, but the main principle is linking up health care services with the fact of payment of personal income tax by a given resident. If the system was based on revenue from other taxes, for instance, social contributions as in Estonia, the entire tax system in Latvia would have to be changed, because health care currently does not receive anything from social contributions which residents make to accumulate money in the pension or benefit system, explained Circene.

The main goal is to identify those residents of Latvia who do not pay personal income tax, as well as those who live and work abroad, said Circene.

The minister said that the proportion of personal income tax revenue that would go to health care was yet to be discussed, and that the Health Ministry was prepared to discuss various proposals.

The concept will offer extensive social safety net, and pensioners and children would still be entitled to free health services as now; the concept will also strive to maximally reduce the social tension risk.

Experts from the World Bank and the World Health Organization have concluded that the Health Ministry's concept is likely to avert most of the risks that other countries have had to deal with, noted Circene.

The concept stipulates linking up state-funded health care services with personal income tax payments. Regardless of whether a person pays or does not pay personal income tax, he or she will be entitled to emergency medical services.

Several social groups will be exempted from paying personal income tax and still receive full state-funded health services: children aged up to 18, pensioners, the disabled, the unemployed (for no more than six months after receiving the status of an unemployed), and others.