Original Article

Taxation and Incentives in Private Health Services Delivery in Nigeria: Opinion of Private Health Practitioners

*Rex Friday Ogoronte A. Ijah,¹Okechukwu Ibeabuchi,²ChinemereJ. Onyema,³

Somiari L. Harcourt⁴, Ajibola Alabi⁵, Friday E. Aaron⁶

¹Department of Surgery, Rivers State University / Rivers State University Teaching Hospital. ²Palmers Hospital, Port Harcourt, Rivers State, Nigeria. ³Department of Nursing, Rivers State University, Port Harcourt, Rivers State. ⁴Department of Surgery, University of Port Harcourt Teaching Hospital, Port Harcourt, Rivers State, Nigeria. ⁵Department of Pediatrics, Rivers State University Teaching Hospital (RSUTH), Port Harcourt, Nigeria. ⁶Department of Orthopedics & Trauma Surgery, Rivers State University/ State University Teaching Hospital, Port Harcourt, Rivers State, Nigeria.

Background: Tax relief and incentives are utilized to encourage the private health sector to provide services that are advantageous to community health. The aim of this study was to explore the issues related to taxes paid, incentives provided, returns on investment, satisfaction with practice, and plans of private health practitioners who were conference attendees in Port Harcourt in 2021.

Methodology: A descriptive cross-sectional study was carried out at two national events in Port Harcourt, Rivers State, Nigeria in October, and December 2021, among conference attendees using self-administered questionnaires. Data obtained was analyzed using the IBM Statistical Package for the Social Sciences (SPSS) version 20.0 and presented in tables.

Results: A total of one hundred and sixty-six (166) respondents were involved in the study. One hundred and four (62.7%) respondents believed they experienced multiple taxation from agencies of government. Most respondents paid at least fifty thousand and above as taxes to various levels of government. One hundred and forty-two (85.5%) respondents believed they did not receive any incentive from governments for their private health businesses. Fifty-three (31.9%) were not satisfied, while55 (33.1%) respondents were managing to survive in the business environment.

Conclusion: Private healthcare practitioners in Nigeria experience multiple taxation and a lack of incentives from governments. Dissatisfaction with the return on investment is prevalent. Inclusive health sector reform that will partly reduce the potential for brain drain is therefore needed.

Keywords: Taxation, Incentives, Public Health Goods, Return on Investment, Private Health Services, Nigeria

*Correspondence: Dr. Rex Friday Ogoronte A. Ijah, Department of Surgery, Rivers State University / Rivers State University Teaching Hospital, Port Harcourt, Nigeria.

Email: [email protected]

How to cite: Ijah RFO, Ibeabuchi O, Onyeam CJ, Harcourt SL, Alabi A, Aaron FE. Taxation and Incentives in Private Health Services Delivery in Nigeria: Opinion of Private Health Practitioners. Niger Med J 2024; 65 (1):81-91

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­­­­­­­­­­­­­Introduction

Tax payment is an age-long practice that still applies in almost all societies, and is referred to as “impot” in French, "imposta" in Italy, "steuner" in Germany, "subsidium" in Latin, among others.^[1] Taxation simply refers to the compulsory levies imposed on individuals or companies by the government as a means of revenue generation to fund the functions of government. Among the cannons or golden principles of taxation is equity, for which George Leon remarked in his writings that taxes should not be so hard on the “peasants” as to push them to consider emigration when they are unable to bear it.^[1]There are arguments for and against tax incentives and competition,^[2-6] however, most governments create favorable environments for businesses to thrive, and indirectly benefit from the taxes paid by the thriving businesses. In other to encourage the growth of small and medium-scale businesses, some form of tax and non-tax incentives are often needed. ^[7-10]

Healthcare services are regarded as public health goods because they promote the health of the community. In Nigeria, 70% of healthcare is provided by the private health sector.^[11]Incentives for the growth of the private health sector are therefore critical to national development. Upgrade of existing public hospitals especially in low-income countries, establishment of public-private partnership, and creating enabling environment for private healthcare businesses to thrive, are some of the strategies (among others) that can be adopted to address shortages in the healthcare industry. The health workforce shortage situation in sub-Saharan Africa is another issue that continues to be a source of concern that needs to be addressed.^{[12-16]}Sub-Saharan Africa has 11% of the world’s population and bears more than 24% of the global burden of disease, but has only 3% of the world's health workforce.^[17]A study analyzing the impact of State incentives on the motivation of workers and the sustainability of the healthcare workforce revealed that training opportunities had the greatest value.^[18] Other forms of incentives include performance-based incentives,^[19] financial incentives,^[20] non-monetary incentives,^{[21, 22],} etc. The role of the private health sector was strongly emphasized especially in resource-poor settings where some local communities may be unreached by the efforts of the government-manned health services.^[23]Peculiar policies of government and investment in private health have elevated India to a position of competitive advantage in the global healthcare industry.^{[24, 25]}

Specific incentives for the growth of the private health sector were a subject of priority to some countries in their reforms. In a study carried out in Ghana and Kenya, access to finance and improving business processes was reported as a tool for improving private healthcare sector contributions to national health.^[26] A report from Malawi revealed that charges per patient in some private health establishments were relatively lower than in the public sector.^[27]In our environment, patients patronize both government and private health establishments. There are concerns of health professionals (including private health practitioners leaving their private health businesses) in favor of “greener pastures”, due to unfavorable practice or business environment.^{[28-30]} Where the public service could not sustain these health professionals, private healthcare practice should naturally be an attractive option for retaining our trained personnel in the healthcare industry within our shores. The aim of this study, therefore, was to explore the issues related to taxes paid, incentives provided, returns on investment, satisfaction with practice, and future plans of those involved in private health service delivery in Nigeria in two conferences held in October and December 2021.

Methodology

Research Design: A descriptive cross-sectional study.

Study Area: The study was carried out in Port Harcourt, the capital city of Rivers State, Nigeria.

Study Sites: The study sites were at two national health sector events - the 7^thAFRI Health Expo (a National Event / Exhibition and Conference showing the services of Clinics, Hospitals, Diagnostic

Centers, and Non-Governmental Organizations) held in Port Harcourt from 20th to 22nd October 2021, at the Atlantic Hall of Hotel Presidential), and the exhibition center of the Annual General meeting and Scientific Conference of the Pharmaceutical Society of Nigeria held in Port Harcourt, Nigeria in December 2021.

Study Population/Participants: Private health care practitioners in Nigeria, including medical, nursing, pharmaceutical, medical laboratory scientists, physiotherapists, and pathological service practitioners.

Sample Size Determination: The total population of attendees at the exhibition centers was used.

Sampling Method: All attendees who gave consent were included.

Study Instrument: Self-administered semi-structured questionnaire was used.

Variables: Information on the demographics of respondents, taxation issues that affect private health practice, incentives for private health practice, practitioners' profit margin, satisfaction with practice, and future plans, were retrieved.

Data Analysis: Data obtained was formed into tables and analyzed using the IBM Statistical Package for the Social Sciences (SPSS) version 20.0.

Validity/Reliability of Instrument: The information in the study instruments was scrutinized and critiqued by all authors to ensure that they achieved the set objectives. The Cronbach alpha (in SPSS) was used to test the validity of the study instrument.

Ethical Considerations: The Research Ethics Committee's approval of the Rivers State University Teaching Hospital was obtained before the commencement of the study.

Results

A 96.0% questionnaire retrieval was achieved and a total of one hundred and sixty-six (166) respondents were involved in the study.

Table 1: Socio-demographic characteristics of respondents (n = 166)

Table 1 shows the sociodemographic characteristics of respondents. The ages of 158 (95.2%) respondents varied from 20 to 69 years. One hundred and forty-two (85.5%) respondents had at least a first-degree education. The place of practice of respondents cuts across the sectors in the health industry, with clinics/hospitals comprising 115 (69.3%).

Table 2: Taxation Issues that affect private health practice (n = 166)

Table 2 shows taxation issues that affect private health practice. One hundred and four (62.7%) respondents believed they experienced multiple taxation from agencies of government. Sixty-one (36.7%) respondents asserted paying taxes of more than a hundred thousand naira to the federal government every year. Sixty-three (37.9%) opined that they paid at least a hundred thousand naira to State governments as tax every year. Thirty-one (18.7%) respondents paid more than a hundred thousand naira yearly to the local government. Twenty-three respondents (13.9%) asserted to pay more than a hundred thousand naira yearly to the community. It is also noteworthy that a significant number of respondents did not pay their taxes to the federal government (30 = 18.1%), state government (28 = 16.9%), local government (30 = 18.1%), and community (50 = 30.1%).

Table 3: Incentives for private health practice (n = 166)

Table 3 highlights the incentives received by respondents for their private health business. One hundred and forty-two (85.5%) respondents believed they did not receive any incentive from governments for their private health business. For those received, 3 (1.8%) felt the incentive was not effective, while 13 (7.8%) opined that it was effective.

Table 4: Profit Margin, Satisfaction with Practice, and Future Plan (n = 166)

Table 4 shows the profit margin, satisfaction with practice, and future plan of respondents concerning their private health practices. The average monthly profit margin after taxation was less than a hundred thousand naira, as reported by 34 (20.5%) respondents. Thirty (18.1%) respondents opined that theirs was at least a million naira monthly. Fifty-eight (34.9%) were satisfied with the return on investment in their private health business, 53 (31.9%) were not satisfied, while 55 (33.1%) respondents were managing to survive in the business environment. Ninety-seven (58.4%) respondents had no “other side business”, while 54 (32.5%) respondents had alternative businesses. The future plans of respondents were varied: 77 (46.4%) respondents planned to stay in practice and hope for improvement; 71 (42.8%) planned to stay in practice and work harder; while a few others planned to close down their business and travel out, go into other businesses, or go for further specialization.

Table 5: Relationship between having alternative (side) business aside from private medical practice and future plans concerning practice.

		Future plans concerning practice
Have alternative (side) business	Close & travel out		Close & go for specialization	Close & do other business	Stay in Practice and work harder	Stay & hope for improvement	Total	(X2)	P-Value
Yes	2(3.7%)		2(3.7%)	3(5.6%)	18(33.3%)	29(53.7%)	54	11.803	0.160
No	4(4.1%)		4(4.1%)	0(0.0%)	47(48.5%)	42(43.3%)	97
Not sure	1(6.7%)		2(13.3%)	0(0.0%)	6(40.0%)	6(40.0%)	15
Total	7		8	3	71	77	166

The relationship between having alternative (side) business and future plans concerning practice is presented in Table 5. This relationship is not statistically significant(P>0.05).

Table 6: Relationship between being satisfied with return on investment from private practice and future plans concerning practice.

Table 6 shows the relationship between “being satisfied with the return on investment from private practice” and “future plans concerning practice”. A statistically significant relationship exists between satisfaction with return on investment from private health practice and future plans of health practitioners concerning private healthcare practice (P-value = 0.008). Those who were not satisfied with the return on investment from private practice were not ready to close down private practice and travel out. In fact, the proportion of respondents who wish to stay in practice work harder, and hope for improvement is higher among those who are not satisfied with the return on investment from private practice.

Discussion

Almost all respondents involved in the healthcare business had a minimum of first-degree qualification, and the majority were aged from 20 to 69years. This implies that all respondents were trained with one professional skill or the other. The age range also means that respondents were in their prime – the productive age group. Private clinic/hospital business appears to be in the majority. The predominance of private clinics/hospitals could be explained by the fact that the study sites were conference and exhibition centers where private health practitioners came to make evaluations and purchases drugs, instruments, and equipment for their hospitals, laboratories, pharmacies, nursing homes, etc.

Most respondents were worried about multiple taxation by agencies of government. Varied amounts were paid as taxes/levies by health business practitioners to various levels of government, including the communities, and unfortunately sometimes to impersonators (touts). These experiences have the potential to create mistrust between practitioners and government agencies. Additionally, these multiple taxes/levies could negatively impact new small and medium-scale businesses, preventing them from attaining their potential, or outrightly discouraging enough to partly lead the entrepreneur to close business in favour of greener pastures. Our study findings agree with similar reports from Nigeria on the inappropriateness of multiple taxations to the growth of businesses.^{[31-35]} About a third of respondents paid more than a hundred thousand naira on a yearly basis to the federal and state governments. About a fifth of respondents also paid similar amounts as taxes to local governments and communities. Almost a fifth of respondents did not pay their taxes. Tax evasion or avoidance cannot be justified. As in every other society, there are those who would be on the wrong side of the law. Similar findings abound as reported by other researchers.^{[36, 37]}

The majority of respondents did not receive any incentive from governments to aid the conduct of their businesses. Some of the few who opined to receiving some form of incentive still felt that they were not effective. Similar experience was reported among private health practitioners in Ghana and Kenya, who lamented on difficulty with accessing finances to improve their business.²⁶In a review of the Nigerian economy in 2020, a researcher concluded that there was a need for political will to implement tough reforms “in four key priorities – macroeconomic stability, human capital development, holistic sector reforms, and policy and regulatory consistencies” - to boost private sector investment.^[38]

The monthly profit margin after taxes paid was variable, however, about a third of respondents were not satisfied with the returns on investment in their private health business, while a similar third was “managing to survive” in the business environment. This finding is an eye-opener that could explain some current and future events. It has a potential for a chain of events: an investor who is unsatisfied with returns on investment is not likely to consider expanding that business; also, unlikely to be comfortable paying statutory taxes/levies; consequently, may consider winding up the business as an option in favour of other alternatives – including “travelling out”; and hence loss of job opportunities for some innocent country men and women; then the undesirable loss of revenue that should be accruable to government (in the form of statutory taxes), and the further reduction in the already depleted healthcare workforce. This

trend of events could be predicted and averted by the government by ensuring an enabling environment for private health businesses to thrive, and hence savour the ripple effect of job opportunities for citizens through this means. Formulation of reforms in the “four key priorities areas” as advocated by another writer,^[38] is therefore apt.

Although many respondents expressed hope for improvement, and planned to stay in business, it is not surprising therefore, that some respondents had the ambition to close their business (and travel out, go into other businesses, or go for further specialization) as their future plan. The situation is further made worse by the observation that most respondents had no other “side business” (or alternative business). The relationship between having an alternative (side) business and future plans concerning practice is not statistically significant. However, it is apparent that out of those who had alternative side businesses, the number of those who wanted to stay in practice and work harder or hope for improvement was higher than those who wanted to close business. Also, out of those who did not have alternative businesses, the total number of those who wanted to stay in practice and work harder or hope for improvement was higher. Those who want to stay in practice and work harder or hope for improvement are more in number among those who did not have alternative business. Therefore, having an alternative (side) business aside from private medical practice or not does not really drive the respondents to close private medical practice and travel out.

A statistically significant relationship exists between satisfaction with return on investment from private health practice and future plans of health practitioners concerning private healthcare practice, and those who planned to stay in practice and work harder / hope for improvement were more in number. This finding could imply resilience in business among the private health services operators, which is positive. However, there was a large pool of respondents who were indecisive in their responses by opining that they were “managing to survive”. The factors involved in influencing the decision of this group of respondents could result in a tilt either way: being satisfied or unsatisfied with the return on investment from private practice. The meaning of this finding is that should the “elastic limit” be exceeded with persisting dissatisfaction with return on investment, there might be an increase in the number of those who would want to close business in favor of the reported exodus of health professionals for greener pastures.

Study Limitations: The study population of 166 in this study is relatively small. However, this was the total number of those identified as private health practitioners who gave consent for the study. The study was carried out mostly among owners of health businesses, and not the core population of health professionals who work in private health facilities. The attendees at the second conference were business owners and their wholesale buyers (health professionals), and not core-health practitioners - this could probably account for the observed resilience.

Conclusion

Private healthcare practitioners in Nigeria experience multiple taxations in their practice and this is worrisome. Incentives from governments to aid the conduct of their businesses were also not within their reach. Most private health practitioners were not satisfied with the return on investments, a situation that impacts negatively on morale for business and future plans. There is therefore need for inclusive health sector reform to accommodate the private healthcare sector, and consequently partly reduce the potential for closed business and brain drain.

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