The Truth About VAT On Medication

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This PowerPoint gives a detail comparison of the situation that obtained under the 1996 harmonized System and the 2007 harmonized system which includes the newly implemented VAT act. This document clearly articulates the gravity of VAT on medication contrary to the notion that VAT has not affected medication.

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  • Presentation view will give a clearer picture of this slide…
  • {C.I.F} represents Cost, Insurance, and FreightTo get your total duties; C.I.F x Total % duties
  • * With the old harmonized system where C-tax was present, approximately $20.50 duties were paid on every $100.00 spent on importation. However, with the introduction of VAT and the new Harmonized system, there is an increase of 17.5% in total taxes bringing the total duties to 38% or $38.00 in duties on every $100.00 spent on importation.
  • The final amounts represent duties on every $100.00 spent on importation
  • In this case, market forces would determine what the final prices would be on the shelves as it is clear that there were no changes in duties for this medication. So the medications being touted as being reduced are not necessarily tied to the changes in the HS system. We should challenge the Labour Government into providing the names of these medications where reductions are realized in order to make a better analysis as to the causes of these reductions.
  • This is the longer version to the calculations done earlier.
  • Example of the longer version using actual figures.
  • Now that we are armed with the facts about VAT on medication, there should be no chickening out when it comes to taking on the Labour Party where this issue is concerned.
  • The Truth About VAT On Medication

    1. 1. THE TRUTH ABOUT VAT ON MEDCATION U.W.P RESEARCH TEAM
    2. 2. VAT ON MEDICATON HS 1996 C-TAX (OLD) IDuty CTax Scharge IDuty VAT Scharge 3003101000 AMPICILLIN (CAPSULES OR ORAL S USPENSION) 10.00 5.00 5.00 3003101000 AMPICILLIN (CAPSULES OR ORAL S USPENSION) 15.00 15.00 5.00 3003102000 AMOXICILLIN (CAPSULES OR ORAL SUSPENSION) 10.00 5.00 5.00 3003102000 AMOXICILLIN (CAPSULES OR ORAL SUSPENSION) 15.00 15.00 5.00 3003109000 OTHER PENICILLINS OR DERIVATIV ES THEREOF 0.00 10.00 5.00 3003109000 OTHER PENICILLINS OR DERIVATIV ES THEREOF 0.00 15.00 5.00 3003201000 TETRACYCLINE (CAPSULES OR SKIN OINTMENT) 10.00 10.00 5.00 3003201000 TETRACYCLINE (CAPSULES OR SKIN OINTMENT) 15.00 15.00 5.00 3003202000 CHLORAMPHENICOL (CAPSULES, ORA L SUSPENSION OR OPTIC DROPS) 10.00 10.00 5.00 3003202000 CHLORAMPHENICOL (CAPSULES, ORA L SUSPENSION OR OPTIC DROPS) 15.00 15.00 5.00 3003203000 GRISEOFULVIN (TABLETS OF A STR ENGTH OF 125 MG OR 500 MG) 10.00 10.00 5.00 3003203000 GRISEOFULVIN (TABLETS OF A STR ENGTH OF 125 MG OR 500 MG) 15.00 15.00 5.00 3003204000 NYSTATIN (SKIN CREAM OR SKIN O INTMENT) 10.00 10.00 5.00 3003204000 NYSTATIN (SKIN CREAM OR SKIN O INTMENT) 15.00 15.00 5.00 3003209000 OTHER ANTIBIOTICS 0.00 15.00 5.00 3003209000 OTHER ANTIBIOTICS 0.00 15.00 5.00 3003310000 HORMONES CONTAINING INSULIN 0.00 15.00 5.00 3003310000 HORMONES CONTAINING INSULIN 0.00 15.00 5.00 3003390000 OTHER HORMONES OR OTHER PRODUC TS OF HEADING MNNO2937 BUT NOT CONT. ANTIBIO 0.00 15.00 5.00 3003390000 OTHER HORMONES OR OTHER PRODUC TS OF HEADING MNNO2937 BUT NOT CONT. ANTIBIO 0.00 15.00 5.00 3003401000 QUININE SULPHATE QUININE HYDRO CHLORIDE AND QUININE DIHYDROCHLORIDE 0.00 5.00 5.00 3003401000 QUININE SULPHATE QUININE HYDRO CHLORIDE AND QUININE DIHYDROCHLORIDE 0.00 15.00 5.00 3003409000 OTHER ALKALOIDS OR DERIVATIVES THEREOF BUT NOT CONTAINING HORMONES 0.00 15.00 5.00 3003409000 OTHER ALKALOIDS OR DERIVATIVES THEREOF BUT NOT CONTAINING HORMONES 0.00 15.00 5.00 3003901000 PALUDRIN (OR 1-(P-CHLOROPHENYL ) 0.00 15.00 5.00 3003901000 PALUDRIN (OR 1-(P-CHLOROPHENYL ) 0.00 15.00 5.00 3003902000 PRESCRIPTION DRUGS CONTAINING VITAMINS A,D1,D2.D3 AND INJECTIBLES 10.00 0.00 5.00 3003902000 PRESCRIPTION DRUGS CONTAINING VITAMINS A,D1,D2.D3 AND INJECTIBLES 15.00 15.00 5.00 3003903000 OTHER VITAMINS 10.00 10.00 5.00 3003903000 OTHER VITAMINS 15.00 15.00 5.00 3003904000 PARACETAMOL ASPIRIN CAFFEINE C ODEINE IBUPROFEN AND INDOMETHACIN 10.00 10.00 5.00 3003904000 PARACETAMOL ASPIRIN CAFFEINE C ODEINE IBUPROFEN AND INDOMETHACIN 15.00 15.00 5.00 3003905000 OTHER ANALGESICS 10.00 10.00 5.00 3003905000 OTHER ANALGESICS 15.00 15.00 5.00 3003906000 SULPHA DRUGS 10.00 10.00 5.00 3003906000 SULPHA DRUGS 15.00 15.00 5.00 3003907000 COUGH AND COLD PREPARATIONS AN TACIDS 10.00 10.00 5.00 3003907000 COUGH AND COLD PREPARATIONS AN TACIDS 15.00 15.00 5.00 3003908000 SALBUTAMOL EPHEDRINE THEOPHYLL INE EPHEDRINE HCL PHENOBARBITONE 10.00 10.00 5.00 3003908000 SALBUTAMOL EPHEDRINE THEOPHYLL INE EPHEDRINE HCL PHENOBARBITONE 15.00 15.00 5.00 3003909000 OTHER MEDICAMENTS (EXCL. GOODS OF HEADING NO.30.02,309.05 OR 30.06) 10.00 10.00 5.00 3003909000 OTHER MEDICAMENTS (EXCL. GOODS OF HEADING NO.30.02,309.05 OR 30.06) 15.00 15.00 5.00 3004101000 AMPICILLIN (CAPSULES OR ORAL S USPENSION) 10.00 5.00 5.00 3004101000 AMPICILLIN (CAPSULES OR ORAL S USPENSION) 15.00 15.00 5.00 3004102000 AMOXICILLIN (CAPSULES OR ORAL SUSPENSION) 10.00 5.00 5.00 3004102000 AMOXICILLIN (CAPSULES OR ORAL SUSPENSION) 15.00 15.00 5.00 3004109000 OTHER PENICILLINS OR DERIVATIV ES THEREOF WITH A PENICILLINANIC ACID 0.00 15.00 5.00 3004109000 OTHER PENICILLINS OR DERIVATIV ES THEREOF WITH A PENICILLINANIC ACID 0.00 15.00 5.00 3004201000 TETRACYCLINE (CAPSULES OR SKIN OINTMENT) 10.00 5.00 5.00 3004201000 TETRACYCLINE (CAPSULES OR SKIN OINTMENT) 15.00 15.00 5.00 3004202000 CHLORAMPHENICOL (CAPSULES , OR AL SUSPENSION OR OPTIC DROPS) 10.00 10.00 5.00 3004202000 CHLORAMPHENICOL (CAPSULES , OR AL SUSPENSION OR OPTIC DROPS) 15.00 15.00 5.00 3004203000 GRISEOFULVIN (TABLETS OF A STR ENGTH OF 125 MG OR 500 MG) 10.00 10.00 5.00 3004203000 GRISEOFULVIN (TABLETS OF A STR ENGTH OF 125 MG OR 500 MG) 15.00 15.00 5.00 3004204000 NYSTATIN (SKIN CREAM OR SKIN O INTMENT) 10.00 5.00 5.00 3004204000 NYSTATIN (SKIN CREAM OR SKIN O INTMENT) 15.00 15.00 5.00 3004209000 OTHER ANTIBIOTICS 0.00 15.00 5.00 3004209000 OTHER ANTIBIOTICS 0.00 15.00 5.00 Tarif_Code Description HS 2007 VAT (NEW) • Comparison of medication using the two HS systems Tarif_Code Description • Note the two I-Duties and (CTax/Vat) side by side. U.W.P RESEARCH TEAM
    3. 3. HS 1996 (OLD) FORMULA FOR CALCULATING TOTAL C-TAX AND TOTAL PERCENTAGE DUTIES EXAMPLE WHERE: Where $100.00 represents C.I.F IMPORT DUTY = 20% CONSUMPTON TAX = 15% SERVICE CHARGE = 5% TO GET THE : TOTAL % CONSUMPTION TAX TOTAL % C-TAX = (C.I.F + IMPORT DUTY) X C-TAX ($100.00 + $20.00) x 15% $120 x 15% = 18% NB// C-Tax is only compounded on import duty TOTAL % C-TAX = 18% TOTAL PERCENTAGE DUTIES = IMPORT DUTY + TOTAL C-TAX + S/CHARGE = 43% 20% 18% 5% U.W.P RESEARCH TEAM
    4. 4. HS 2007 (NEW) FORMULA FOR CALCULATING TOTAL “VAT” AND TOTAL PERCENTAGE DUTIES EXAMPLE WHERE: Where $100.00 Represents C.I.F IMPORT DUTY = 20% VAT = 15% S/CHARGE = 5% TO GET THE: TOTAL % “VAT” TOTAL % VAT = ( C.I.F + IMPORT DUTY + S/CHARGE ) X VAT VAT is compounded on import duty and s/charge ( $100.00 + $20.00 + $5.00) X 15% $125.00 X 15% = 18.75% TOTAL VAT = 18.75% TOTAL PERCENTAGE DUTIES = IMPORT DUTIES + TOTAL VAT + S/CHARGE = 43.75% 20% 18.75% 5% U.W.P RESEARCH TEAM
    5. 5. Comparison of Ampicillin Capsule or Oral Suspension (widely used antibiotic) HS 1996 Tariff Code: 3003101 HS 2007 (VAT) Tariff Code: 3003101 Calculation under Old Rates: Import Duty= 10% C-Tax= 5% S/Charge= 5% Where the C.I.F is = $100.00 Total % C-tax = (C.I.F + Import Duty) x C-Tax ($100.00 + $10.00) x 5% $110.00 x 5% = 5.5% Total % Duty = I-Duty + Total C-tax + S/charge 10% + 5.5% + 5% = 20.5% Pharmacy A would have paid $31.50 on this consignment Calculations under new rate: Import Duty = 15% VAT= 15% S/Charge= 5% Where the C.I.F = $100.00 Total % VAT = (CIF + I-Duty + S/Charge) x VAT ($100.00 + $15.00 + $5.00) x 15% $120.00 x 15% = 18% Total % Duty = I-Duty + Total VAT + S/Charge 15% + 18% + 5% = 38% Pharmacy A would have paid $38.00 on this Consignment an increase by $17.50 or 17.5% U.W.P RESEARCH TEAM
    6. 6. AMOXICILLIN CAPSULES OR ORAL SUSPENSION HS 1996 TARIFF Code: 3003102 HS 2007 Tariff Code: 3003102 Calculation under Old Rates: Import Duty= 10% C-Tax= 5% S/Charge= 5% Where the C.I.F is = $100.00 Total C-tax = (C.I.F + Import Duty) x C-Tax ($100.00 + $10.00) x 5% $110.00 x 5% = 5.5% Total % Duty = I-Duty + Total C-tax + S/charge 10% + 5.5% + 5% = 20.5% Pharmacy A would have paid $20.50 on this consignment Calculations under new rate: Import Duty = 15% VAT= 15% S/Charge= 5% Where the C.I.F = $100.00 Total % VAT = (CIF + I-Duty + S/Charge) x VAT ($100.00 + $15.00 + $5.00) x15% $120.00 x 15% = 18% Total % Duty = I-Duty + Total VAT + S/Charge 15% + 18% + 5% = 38% Pharmacy A would have paid $38.00 on this Consignment an increase by $17.50 or 17.5% U.W.P RESEARCH TEAM
    7. 7. TETRACYCLINE CAPSULE OR SKIN OINTMENT HS 1996 Tariff Code: 3003201 HS 1997 Tariff Code: 3003201 Calculation under Old Rates: Import Duty= 10% C-Tax= 10% S/Charge= 5% Where the C.I.F is = $100.00 Total % C-tax = (C.I.F + Import Duty) x C-Tax ($100.00 + $10.00) x 10% $110.00 x 10% = 11% Total % Duty = I-Duty + Total C-tax + S/charge 10% + 11% + 5% = 26% Pharmacy A would have paid $26.00 on every $100.00 for this consignment Calculation under New Rates: Import Duty= 15 VAT= 15% S/Charge= 5% Where the C.I.F is = $100.00 Total % VAT = (C.I.F + Import Duty + S/Charge) x VAT ($100.00 + $15.00 + $5.00) x 15% $120.00 x 15% = 18% Total % Duty = I-Duty + Total VAT + S/charge 15% + 18% + 5% = 38% Pharmacy A would have paid $38.00 on this consignment an increase by $12.00 or 12.00% U.W.P RESEARCH TEAM
    8. 8. HORMONES CONTAINING INSULIN HS 1996 Tariff Code: 3003301 Calculation under Old Rates: Import Duty= 0 C-Tax= 15% S/Charge= 5% Where the C.I.F is = $100.00 Total % C-tax = (C.I.F + Import Duty) x C-Tax ($100.00 + $0) x 15% $100.00 x 15% = 15% Total % Duty = I-Duty + Total C-tax + S/charge 0% + 15% + 5% = 20% Pharmacy A would have paid $20.00 on this consignment HS 2007 Tariff Code: 3003301 Calculation under New Rates: Import Duty= 0 VAT= 15% S/Charge= 5% Where the C.I.F is = $100.00 Total % VAT = (C.I.F + Import Duty + S/Charge) x VAT ($100.00 + $0 + $5.00) x 15% $100.00 x 15% = 15% Total % Duty = I-Duty + Total VAT + S/charge 0% + 15% + 5% = 20% Pharmacy A would have paid $20.00 on this consignment an increase by $0.00 or 0.00% U.W.P RESEARCH TEAM
    9. 9. PARACETAMOL, ASPRIN,CAFFEINE, CODEINE, IBOPRO FEN, INDOMETHALIN HS 1996 Tariff Code:3003904 Calculation under Old Rates: Import Duty= 10 C-Tax= 10% S/Charge= 5% Where the C.I.F is = $100.00 Total C-tax = (C.I.F + Import Duty) x C-Tax ($100.00 + $10.00) x 10% $110.00 x 10% = 11% Total % Duty = I-Duty + Total C-tax + S/charge 10% + 11% + 5% = 26% Pharmacy A would have paid $26.00 on this consignment HS 2007 Tariff Code: 3003904 Calculation under New Rates: Import Duty= 15 VAT= 15% S/Charge= 5% Where the C.I.F is = $100.00 Total % VAT = (C.I.F + Import Duty + S/Charge) x VAT ($100.00 + $15.00 + $5.00) x 15% $120.00 x 15% = 18% Total % Duty = I-Duty + Total VAT + S/charge 15% + 18% + 5% = 38% Pharmacy A would have paid $38.00 on this consignment an increase by $12.00 or 12% U.W.P RESEARCH TEAM
    10. 10. COUGH AND COLD PREPARATIONS, ANTACIDS HS 1997 Tariff Code: 3003907 HS 2007 Tariff Code: 3003907 Calculation under Old Rates: Import Duty= 10 C-Tax= 10% S/Charge= 5% Where the C.I.F is = $100.00 Total C-tax = (C.I.F + Import Duty) x C-Tax ($100.00 + $10.00) x 10% $110.00 x 10% = 11% Total % Duty = I-Duty + Total C-tax + S/charge 10% + 11% + 5% = 26% Pharmacy A would have paid $26.00 on this consignment Calculation under New Rates: Import Duty= 15 VAT= 15% S/Charge= 5% Where the C.I.F is = $100.00 Total % VAT = (C.I.F + Import Duty + S/Charge) x VAT ($100.00 + $15.00 + $5.00) x 15% $120.00 x 15% = 18% Total % Duty = I-Duty + Total VAT + S/charge 15% + 18% + 5% = 38% Pharmacy A would have paid $38.00 on this consignment an increase by $12.00 or 12% U.W.P RESEARCH TEAM
    11. 11. ALTERNATE (HS 1996) AND (HS 2007) FORMULA • THE ARE ALTERNATE METHODS USED IN ARRIVING AT THE TOTAL PERCENTAGE CONSTUMPTION TAX AS WELL AS TOTAL PERCENTAGE VAT. THIS METHOD IS LENGTHY BUT GIVES CREDENCE TO THE $100 DOLLAR BASE CIF THEORY. • FORMULA 1 OLD HS 1996: – TOTAL % C-TAX = (C.I.F + IMPORT DUTY ) X C-TAX C.I.F X 100 TOTAL % DUTIES = ( IMPORT DUTY + TOTAL % C-TAX + SERVICE CHARGE) • FORMULA 2 CURRENT HS 2007: – TOTAL % VAT = (C.I.F + IMPORT DUTY + SERVICE CHARGE) X VAT C.I.F X 100 TOTAL % DUTIES = (IMPORT DUTY + TOTAL % VAT + SERVICE CHARGE) U.W.P RESEARCH TEAM
    12. 12. ALTERNATE HS 2007 FORMULA • Assuming: Consignment of Antacids – Cost: – INS: – Freight – C.I.F – – – – – – $5000.00 $ 100.00 $ 900.00 $6000.00 Import Duty: 15% VAT : 15% SC : 5% Total % VAT - (C.I.F + I-Duty + SC) X VAT/C.I.F ($6000.00 + $900.00 + $300.00) X 15% $7200.00 X 15% = $1080.00/$6000.00 Total % VAT = 18% Total Duties = $900.00 + $300.00 + $1080.00 = $2280.00 Total % Duties = 15% + 18% + 5% = 38% • In essence, the importer will pay $38.00 on every $100.00 spent on this consignment. U.W.P RESEARCH TEAM
    13. 13. SUMMARY • The issue of VAT on medication has been misrepresented by the government. The figures quoted in this presentation gives a true reflection of how taxes are computed and could be verified with officials at the Customs Department. • It is quite clear that the introduction of the new harmonized system together with the implementation of VAT has seen a vast increase in the Tariff rates of medication with about 10% remaining unchanged. Further, there seem to be no evidence to suggest that there is any reduction in tariffs for medication U.W.P RESEARCH TEAM
    14. 14. THE END U.W.P RESEARCH TEAM

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