TALLINN - The Estonian Ministry of Finance does not support a bill initiated by members of the junior coalition partner Isamaa and the opposition Center Party and Estonian Conservative People's Party (EKRE) seeking to reduce the VAT rate on certain pharmaceuticals to 5 percent as the ministry estimates doing so would not serve the bill's intended purpose of making medicines for the treatment of cancer and other malignant tumors more accessible.
The tax reduction would concern pharmaceuticals that are not included on a list of medicines the cost of which is compensated to patients by the Health Insurance Fund either 75 or 100 percent.
"Medicines are already subject to a reduced VAT rate of 9 percent, and lowering the tax rate to 5 percent does not affect the price of the pharmaceuticals to such an extent that it becomes more accessible for those who need it. It is unlikely that a 4-percent difference in VAT is such an important factor in the decision-making process that it determines if the person should buy the pharmaceutical for their own money or not," Minister of Finance Annely Akkermann said in her reply to the initiators of the bill.
The bill seeking to amend the Medicinal Products Act also provides that the Health Insurance Fund would compensate non-profit organizations, foundations and religious associations for the VAT on cancer treatment medicines bought for donations.
The initiators of the bill deem it unreasonable that charitable organizations should pay such a high VAT rate.
"There is a privately initiated cancer treatment support foundation "The Gift of Life" in Estonia. The foundation helps private individuals as well as the state by covering costs that the state is not prepared to cover when purchasing pharmaceuticals. By raising donations and using them to buy pharmaceuticals prescribed by doctors, the foundation pays VAT. Therefore, a relatively high percentage of the raised funds goes back to the state. During its nine years of operations, the foundation has spent some 1.5 million euros on VAT. This sum could cover six months of treatment for cancer patients," representatives of the foundation said.
Around 100 people receive treatment with the foundation's help during a period of six months. The initiators of the bill deem the large VAT costs unfair to important target groups, including donors, prompting the intention to reduce the VAT rate on the medicines.
The minister of finance, Annely Akkermann, said that such regulation would create inequality because it is not just non-profit organizations engaging in charitable endeavors but also private individuals and companies.
"In addition, more inequality would be created by the compensation only pertaining to pharmaceuticals for the treatment of cancer and malignant tumors and not other medicines that are not part of the Health Insurance Fund's list," Akkermann said.
The European Union's directive on a common VAT system prevents fully eliminating VAT for pharmaceuticals that are not on the Health Insurance Fund's list. The regulation permits member states to apply up to two reduced tax rates, including on pharmaceutical products, medical devices and aids.
Among other options for reducing the price of cancer medicines, the MPs also weighed updating the Health Insurance Fund's list with pharmaceuticals that it does not currently include. The list is regulated by an order of the minister, however, which is why the legislator cannot intervene in it. The implementation of the corresponding measure would also be much more costly than of that proposed in the bill.