Health Insurance Fund: Incentive-based tax breaks for companies need further analysis
The Finance Ministry’s plan to exempt employee health and health promotion costs from tax required additional analysis, the Health Insurance Fund finds. What services are covered, how they are financed, and the maximum price needed to be set out first.
The Finance Ministry is working on a bill that would exempt expenses like employee’s gym memberships worth up to €400 a year from the Estonian fringe benefits tax.
The bill already states several expenses the measure wouldn’t cover, among them employees’ participation in amateur sports events, the regular use of a sports or physical exercise facility, the maintenance of the employer’s existing sports facilities, and paying for the services of a variety of therapists.
The Health Insurance Fund’s CEO, Tanel Ross, said in a letter to the ministry that it was necessary to very precisely define what expenses exactly could be exempt from the fringe benefit tax. “It's essential to examine the impact of the measure on other groups, keeping in mind the way health care is organized in Estonia, the fundamental principles of health insurance, and the possibilities of the health care system,” Ross said.
He pointed out that any additional incentive for businesses would need to support the sensible use of such a public resource. The principle of the Estonian healthcare system was to ensure the availability of need-based health care services to everyone on equal terms, which is why handing out tax privileges like this needed to be closely examined.
An issue Ross mentioned in his letter that is hard to ignore is the effect of the planned changes on the country’s health insurance budget. It would reduce the amount of social tax paid by businesses on their employees, the estimated financial impact of the change is around €500,000, based on data for 2015.
To keep the new measures from undermining the financial position of public health insurance and guarantee equal access to health care services, funding would have to be allocated in the state budget to compensate for the expected tax losses, Ross pointed out.