|
|
Evaluation of BOI fiscal incentives for private hospital investment |
| |
| Project ID: PS-001 |
Status: Completed |
With the concern to attain health MDGs, policymakers have seized upon the potential of the private sector to expand services and improve health outcomes. However, comprehensive, rigorous evaluations of potential interventions are limited, and few have examined equity. This study, which was commissioned from IHP Fellow, Dr. Rannan-Eliya, by Sri Lanka�s Commission on Macroeconomics and Health involved a detailed evaluation of a well-established intervention � tax incentives � to expand one type of private provision � hospital care � in Sri Lanka. Sri Lanka has provided numerous incentives to private hospital investors since 1992, consisting of reductions in corporate income tax, import duties and sales taxes, and subsidized land. The fiscal cost of these incentives was estimated in terms of foregone tax revenues and net impact on public sector debt, making use of regulatory data, and by examining the terms of the specific investment promotion agreements signed by each investor. Direct fiscal costs of the incentives were in the region of Rs. 1,400-1,600 million (approx. US$ 20 million) between 1992 and 2003: 70% contributed by land concessions, and the rest equally by the GST/VAT and import duty exemptions. A surprising finding is that the incentives failed to increase overall private sector hospital supply, and instead induced existing operators to switch investments into projects eligible for the promotion schemes. This shift was associated with increasing capital and technology intensity. Taking into account the average and marginal costs of treating patients in publicly-funded hospitals, and the cross-elasticity of demand for public and private services, it is concluded that the schemes are a highly inefficient use of limited public money, and also encourage technical inefficiency by expanding services for non-priority conditions. They cost the government 4-10 times as much in foregone tax revenue as the maximum likely cost savings associated with patients switching to the private sector. Other data indicate that the net beneficiaries of the fiscal incentives were concentrated in the highest income decile, showing that the incentives were poorly targeted. The findings underline the need for proper and more rigorous evaluation of such policies in developing countries, before assuming that they represent a solution to known health system problems. |
|
IHP publications & reports |
| None available |
| |
External publications |
| None available |
| |
Presentations |
|
|
| |
| Project
at a glance |
|
Project
team |
| Start Date: |
Aug 2003 |
| End
Date: |
Jan 2005 |
| Themes: |
Private healthcare, Fiscal policy |
| Sponsor(s): |
WHO |
| Client: |
National Commission on Macroeconomics and Health |
|
|
| IHP Staff: |
RP Rannan-Eliya |
| Consultant(s): |
Ajantha Kalyanaratne |
|
| |
| Location |
|
Further
information |
| Region: |
Sri Lanka |
| Country(s): |
Sri Lanka |
| Partner(s): |
Ministry of Health |
|
|
| More details: |
|
| Related IHP research: |
|
|
External links:
|
|
| |
| |
|
| |
|
|
