Handling Value Added Tax (VAT) in Economic Evaluations

Should Prices Include VAT?

Abstract

In health economic evaluations, value added tax is commonly treated as a transfer payment. Following this argument, resources are valued equal to their net-of-tax prices in economic evaluations applying a societal perspective. In this article we argue that if there is the possibility that a new healthcare intervention may expand the healthcare budget, the social cost of input factors should be the gross-of-tax prices and not the net-of-tax prices. The rising interest in cost-benefit analysis and the use of absolute thresholds, net benefit estimates and acceptability curves in cost-effectiveness analysis makes this argument highly relevant for an appropriate use of these tools in prioritisation.

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Acknowledgements

No sources of funding were used to assist in the preparation of this review. The authors have no conflicts of interest that are directly relevant to the contents of this review.

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Correspondence to Professor Mickael Bech.

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Bech, M., Christiansen, T. & Gyrd-Hansen, D. Handling Value Added Tax (VAT) in Economic Evaluations. Appl Health Econ Health Policy 5, 209–213 (2006). https://doi.org/10.2165/00148365-200605040-00003

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Keywords

  • Economic Evaluation
  • Marginal Cost
  • Opportunity Cost
  • Input Factor
  • Shadow Price