Tax Treatment Equalization Study Of Hospital

The establishment of medical and health system reform program requires a corresponding tax system. It is necessary to develop suitable tax system according to the nature of the medical service and the important position of medical and health service, medical service industry has a positive external effect. Medical service is a part of social security; it brings about healthy labor resources for the society with general and undifferentiated benefits, which provides important basics for sustainable development and livelihood security. However, research on legal system of revenue of health service industry is deficient compared with education and the cultural industry. Comparatively low legal level such as “notification” results in unreasonable facts in practices.Through generalizing the tax law of the medical service organization in China and reference data of China tax statistical yearbook, It can be found that the tax law system of China’s hospitals is unbalanced between public hospitals and private hospitals. Private hospitals can not enjoy the same treatment when providing the same basic medical services as public hospitals which violates the taxability theory. Private hospitals apply to the tax rates for general service industries leading to its business tax burden not only higher than that of public hospitals, but also higher than that of transportation, construction, culture, sports and other services industries. Although since2009, public and private hospitals are exempt from business tax, due to the double taxation of business tax, hospital’s tax burden has been alleviated at limited extent. Even after the reform program to replace the business tax with a value-added tax, hospitals have been over-taxed still. Based on the analysis of value added tax(VAT) theory and the summary of developed country’s VAT experiences, At present, the three main types of VAT on medical services include Comprehensive Tax Model, Exemption and Tax Rebate Mode and Tax Exemption Mode. According to the valuation of Pattern economic effect and the value orientation of China’s new medical reform, this paper analyze the reference values of three modes for China’s VAT reform on medical service industry.The author believes that different tax policies should be adopted according to the types of medical and health services, fiscal solvency could be guaranteed under the premise of maximizing the efficiency of public resources. For projects that can directly or indirectly enjoy the financial support of the government, zero tax rate is applicable; For independent pricing medical program, a comparatively low tax rates helps lighten the tax burden and encourage the development of private hospitals thus improve the whole society’s supply of medical service system. For income tax, private hospitals can enjoy preferential tax policy such as exemption for 3 years under strict conditions whereas qualified income of public hospitals are exempted from enterprise income tax. On the other hand, undifferentiated、universal preferential tax policy foster public hospitals’ profit seeking behaviors, which reinforce their monopoly and undermined private hospitals’ interest. At the same time, private hospitals are drove to avoid tax by frequently change to public hospital. Private hospitals in Wenzhou, as a miniature of private hospitals in China, is having a hard time under the current tax system.Wenzhou Institute of health economics conducted a survey on Wenzhou private hospitals’ 6 main taxes such as business tax, corporate income tax, the results showed that private hospitals’ tax income accounts for 10.11% of total annual business income. The annual balance of the private general hospitals accounted for about 14% of the total revenue while private specialized hospital accounted for 1.32%, the average rate of private hospitals is about 7%-9%, which is lower than the proportion of tax revenues. The analysis of the business situation and tax burden of the private hospitals in Wenzhou reveals that for-profit hospitals shifting their tax burden mainly by drive down wages,improve drugs and services’ price. These two approaches weakened private hospitals’ long-term development and reducing its public’s evaluation. However, without shifting taxes, for-profit hospitals’ survival and development will be challenged under the pressure of heavy tax and intensive competition. That explains private hospitals’ dilemma.Profit-making hospitals provide public welfare medical product but cannot enjoy duty-free treatment only because of the property, this violates taxability theory. At the same time, the market economy is distorted under the unreasonable tax treatment thus undermine profit-making hospitals’ public welfare. The development of medical and health service determines the improvement of national health level. In order to further improve the development of medical institutions, to attract social capital into the medical services industry, to activate the allocation ability of public hospital resource, we should change the existing discriminatory tax policies for private hospitals and impose lower tax rate on medical industry. At the same time, we should design the corresponding tax system according to the basic characteristics of the medical industry, create an equal environment for medical and health services, combine tax base, tax rate and tax preference to significantly boost the effect and effectiveness of medical and health services industry.