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Ivory Coast, Morocco Urged To Alter Health Funding Via Taxes

By Joseph Boris · September 14, 2020, 6:52 PM EDT

Changes in how taxes finance public health programs in Ivory Coast and Morocco are needed so that the African countries can reduce their exposure to COVID-19 and surmount longer-term, systemic challenges, according to two U.N.-backed reports issued Monday.

The pandemic has shown that weaknesses in one country's health sector can dramatically affect conditions elsewhere, but developing nations face problems beyond the current crisis, the Global Fund to Fight AIDS, Tuberculosis and Malaria said in its reports on Morocco and Ivory Coast, using that country's French name, Côte d'Ivoire.

In both countries, the reports conclude, the pandemic's economic damage in terms of slashed public revenues and pressure to boost government spending has increased the sense of urgency to mobilize domestic resources. That's a term used by economists and international development specialists to emphasize the importance of sound tax policies through their design, legal drafting and administration.

Moreover, the post-pandemic period could see governments' budgets stretched to address costs tied to other ongoing health threats such as AIDS, tuberculosis and malaria, the reports' authors, Céline Colin and Bert Brys, said in a blog post. Colin is a tax economist and Brys a senior tax economist with the Organization for Economic Cooperation and Development's Center for Tax Policy and Administration.

"Greater and better-designed health taxes, levied on goods that adversely affect health, can play an important role and create new opportunity as a source of funding," the authors said.

While the two countries studied have taxes in place on tobacco, alcohol and sugar-sweetened beverages, each has significant capacity to increase its revenue-raising potential, according to Colin and Brys.

Ivory Coast's tax rates on tobacco could be increased, and a national plan for new excise duties on goods including cosmetics is expected to proceed, as indicated by recent regional legislation, the authors found. In Morocco, tobacco tax revenues are relatively high, but the taxes' design could be improved, while tax rates on alcohol could be increased, they said.

The Global Fund is an international financing organization founded in 2002 that unites donors and implementing agencies working to end the epidemics of HIV/AIDS, tuberculosis and malaria, in line with the United Nations' sustainable-development goals. To date, the Global Fund has provided Ivory Coast $640 million and Morocco $100 million to help build capacity to fight the three diseases and mobilize resources to fund their national health care systems.

To strengthen those efforts amid the pandemic and its aftermath, the OECD-affiliated specialists were asked to consider what countries such as Ivory Coast and Morocco could do to mobilize more tax revenues to finance their health systems.

The authors note that in both countries, the rate of government health spending is lower than the average for lower- to middle-income nations. In Ivory Coast, the level is just 4.5% of gross domestic product, or $70 per capita, while Morocco's is 5.2% of gross domestic product. Residents of both countries must therefore pay a disproportionate share of health costs out of their own pockets, creating a system that is both inequitable and regressive, Colin and Brys concluded.

Morocco has confirmed more than 1,000 new cases of COVID-19 every day since July, the highest surge of any North African country, and on Friday recorded a record 2,430 instances of the respiratory disease. Working conditions for some medical personnel in the country's capital, Rabat, are so bad that they have staged protests over inadequate staffing and poorly equipped facilities.

Despite a three-month lockdown, the novel coronavirus that causes COVID-19 spread in Morocco and surged after restrictions were lifted, reaching 88,203 cases as of Monday, according to the World Health Organization. The caseload, which includes 1,614 deaths, in the country of 36 million people is the third-biggest in Africa.

Ivory Coast, a country of 26 million people in sub-Saharan West Africa, had recorded 19,013 cases of COVID-19, including 717 deaths, as of Monday, according to WHO figures.

The reports' authors also pointed to each country's broader group of taxes linked directly or indirectly to health, including those that finance public health systems but also certain environmental taxes and social security contributions. Increasing the role of such taxes would improve environment and health outcomes in the long term while diversifying each country's revenue mix, Colin and Brys explained.

In Morocco, which introduced compulsory health insurance in 2005 and faces a budget deficit this year, changes to health insurance financing would be welcome, especially in terms of contribution costs and better government control over spending, the reports' authors assert.

Ivory Coast, whose mandatory health insurance program is only a year old, would benefit if the government's contribution were made more progressive over the long term, Colin and Brys said. They pointed to additional sources of financing, beyond taxes on labor income, that could complement the overall financing setup.

However, to increase revenues directed to health systems, countries generally should use their tax mix in ways that are fair and least harmful to economic growth, and that have low administrative and compliance costs, the authors said. This approach should draw on taxes on corporate and personal income; consumption, including value-added taxes; and property.

In both countries, the pandemic has created a window of opportunity to strengthen the formal economy so that more workers are brought into the social safety net, according to the reports. This requires a formalization strategy covering "reform of labor market regulations, social protection measures, taxation and other key areas," wrote Colin and Brys, adding that this should fit with other base-broadening measures to fight tax fraud and evasion as well as illicit financial flows, and rationalization of generous but poorly targeted tax spending.

Ivory Coast and Morocco limit the use of earmarked revenues, but there may be a case for "soft earmarking" of health tax proceeds, mainly because historically those have been modest compared with the countries' large existing and emerging health spending needs, the authors said.

Representatives of the Moroccan and Ivorian governments didn't immediately respond to requests for comment about the reports. 

--Editing by Vincent Sherry. 

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