Milk the dairy & bleed the doctors

LAHORE: The government’s excuse for not taxing edibles and health services is it will burden the poor yet these sectors are jacking up their rates/charges/fees absolutely without any scruples.

There is a flaw in this policy. This scribe interviewed the chairman of a multinational dairy producer about 15 years back a month before the announcement of the federal budget.

The gentleman argued that sales tax on dairy products would make dairy products out of reach of the common man. The government of the day, which was contemplating bringing the dairy sector under sales tax net, did not impose the measure that year. Exactly one month later the rate of packed milk was increased by 20 percent. How come the consumers tolerated that hefty increase?

The government in the next year’s budget increased the rate of sales tax on some dairy products from 10 to 17 percent. There was a strong protest from the dairy sector. They met the federal finance minister and the additional tax was withdrawn to save high-end consumers from price hike. Only few value-added dairy products are under sales tax net.

The dairy milk is exempted from any tax, yet the rates of packed milk continue to increase every year very sharply.

The milk processors procure milk from the dairy farmers. The most state-of-the-art dairy producers’ part with their produce at Rs60 per liter, while the ordinary farmers get even less.

This milk after processing is marketed at Rs155-170 per liter. During the processing the fat in the product is reduced to 4.5 percent (the buffalo milk contains up to 9 percent fat). It is heated, homogenised and added with preservatives before packing. The fat is used for making other value-added products. Some powdered milk is also added during the homogenisation process. The powdered milk is cheaper than fresh milk.

Ordinary consumers cannot afford processed dairy products. Almost 93 percent of consumers buy loose milk, desi ghee, and curd at much lower rates. The 5-7 percent affluent classes consume processed ultra-heat treated milk that is very expensive. They are not bothered if the prices increase.

That is evident from the fact the sales of processed dairy products continue to post healthy growth every year. Why is the exchequer deprived of a little revenue? If the entire processed dairy line is documented through sales tax it would check income tax evasion as well.

The medical profession has progressed on the same pattern as the dairy sector. The doctors and the hospitals are under the sales tax regime because this being a pass on tax would increase the financial cost of the treatment. Patients are charged exorbitant consultation and surgery fees.

They pay hospital room rents higher than high-end hotels. Most of them cannot afford the cost of treatment. However they have no choice and in order to get their dear ones treated they sell their assets and spend all their savings.

The doctors are service providers. They examine the patient and suggest treatment for which they charge a very high fee. They operate on the patients and charge them a fortune. The surgery charges are in addition to the operation theatre charges and the medicines used during operation.

These services most of the time cure the patient but there is no guarantee there will a full post-operative recovery and survival. Services charges have to be paid and the hospitals do not allow the patient to go home or handover the body unless the service charges are paid.

How can we allow members of a noble profession to fleece ailing humanity and not pay the due taxes? We must devise a mechanism to ensure the doctors and the hospitals pay full sales and income taxes. If they are properly taxed the amount of revenue collected would be staggering.

The hospitals and clinics could be electronically monitored to ensure proper tax collection. About 50 percent of the levies collected from the medical profession including hospitals could be used for compensating the patients if they come up with proper receipts. The rest could be used for improving the healthcare facilities.

The amount of taxes if collected transparently would be higher than the health budget of each province. We cannot let some professions go on accumulating wealth in the name of serving humanity.