Handling Value Added Tax (VAT) in Economic Evaluations

Should Prices Include VAT?


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