An Analysis of the Tertiary Hospital Development Fund Bill, 2021
All over the world, tertiary health care institutions are considered as hospitals where state-of-the- art infrastructure exists for investigation and treatment of complex medical ailments, where breakthrough medical research is carried out for the benefit of mankind as well as where seasoned medical experts and consultants are trained.
While this is the norm globally, tertiary institutions in Nigeria have however, largely been unable to meet up to these standards due to poor infrastructure, inadequate funding, weak policy making and implementation. These and other longstanding challenges are also faced by the entire Nigerian health sector. For example, only about 4.3% of Nigeria's 2021 budget is appropriated to the Federal Ministry of Health, which is a far cry from what is required to provide quality health services to Nigerians.
This budgetary allocation for the health sector typically accounts for less than 1% of the nation's Gross Domestic Product (GDP) furthering inevitable geographic inequality, poor motivation and remuneration for healthcare workers, mass emigration of healthcare workers and poor infrastructure, amongst others. Thus, in a bid to address the current state of the Nigerian tertiary health sector, the Senate of the Federal Republic of Nigeria passed the Tertiary Hospital Development Fund Bill on the 5th of October 2021 ("the Bill'') for the rehabilitation, restoration and consolidation of Tertiary Healthcare in Nigeria.
Earmarked taxes such as this one, are not new within the Nigerian tax landscape and the Bill, if it becomes an Act, will be an addition to the numerous earmarked taxes in force in the country. This article therefore analyses and discusses the meaning of earmarked taxes, an overview of the Bill as well as its potential impact on businesses and the fiscal landscape in Nigeria.
What are Earmarked Taxes?
Earmarked taxes are taxes raised and allocated to specific expenditure programs, often through an extra budgetary fund. It typically refers to dedicated taxes or levies introduced by government to generate revenue for specific projects. Examples of earmarked taxes currently in force in Nigeria include the Police Special Trust Fund Levy, the Tertiary Education Tax, Nigerian Social Insurance Trust Fund Levy, National Information Technology Development Levy and the National Agency for Science and Engineering Infrastructure Levy, etc.
Indeed, many countries utilize earmarked taxes as a means of generating funds for the health sector and also funding key health projects. For example, Ghana currently earmarks 2.5% of value added (VAT) collected to fund its National Health Insurance Scheme. The Philippines also has a public health tax on alcohol and tobacco which is earmarked to achieve subsidized insurance coverage for the poor, amongst many other countries who have adopted a similar approach
Highlights of the Tertiary Hospital Development Fund Bill 2021
The Bill seeks to shift the burden of financing tertiary health institutions from the Federal Government to taxpayers through the introduction and imposition of earmarked taxes, which will be dedicated to the provision and maintenance of health care services and infrastructures.
We have discussed below key highlights of the Bill:
Organizations Liable to Pay Taxes under the Bill
The Bill provides that payments into the Fund shall comprise of take-off grant provided by the Federal Government, money appropriated by the National Assembly as well as money from the sources listed below, namely:
- 1% of petroleum companies tax paid on total barrels of crude oil produced yearly;
- 1% of mobile phone services providers' tax paid on airtime and data sold yearly
- 1% of beverages' and breweries' companies tax paid on profit yearly declared;
- 1% of cement companies tax paid on profit yearly declared;
- 1% of paint and chemical manufacturing companies' tax paid on profit yearly declared; and
- 1% of tobacco companies' tax paid on profit yearly declared.
Consequently, upstream oil and gas companies, telecommunications service companies, paint and chemical products manufacturers, beverages production and breweries companies, and tobacco and cement manufacturers will be required to pay the above stipulated taxes. Failure to comply will, upon conviction, attract a fine not exceeding ?2,000,000,00 or imprisonment for a term of two years or both. All individuals concerned in the management of any company in breach are liable to be proceeded against and punished for the offence, as if same were committed by them.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
