Reassessing the “VaxTax”

By Nathan Petrovic.

The COVID-19 pandemic has revealed that inequalities are still a worldwide problem concerning healthcare, especially regarding the distribution of COVID-19 vaccines. As more affluent countries bought massive stocks of vaccines, lower and middle income (LMICs) countries struggled to gather enough vaccines. To counteract this predicament, Albertsen and Germani et al. have proposed that, past a certain threshold of orders of vaccines, states should be taxed by a percentage depending on the number of orders in relationship with said threshold. The rate of taxation would itself grow as the richer countries order more while being above said threshold.

A taxation system makes sense for several reasons. First, it allows for sustained production because such a system won’t serve as a disincentive for vaccine manufacturers. Second, it allows a fair distribution of essential goods that otherwise may not afford these products. Third, it allows to create a disincentive against hoarding vaccines.

I argue that establishing such a threshold requires careful consideration around what kind of pathogen we are dealing with. Because this tax will also place a heavier burden on healthcare budgets in high income countries, such a threshold must be established democratically as well as scientifically.  Some  have proposed to establish the threshold according to an accurate estimation of the rate of immunity needed to protect the rest of the population (what is commonly referred as “herd immunity”). This poses issues because this rate can change and evolve across time which can be problematic because taxes can only function when the rate is stable, and an idea of a taxation system that would have to follow unpredictable mutations of a virus. If we set the threshold according to a proportion of the more vulnerable population in a given country, we are faced with the problem that the pathogenicity and lethality of a virus can evolve unpredictably (as we have seen with omicron), and the number of people at risk for any given set of mutations can also evolve. Thus, it could only be applied if we are certain that mutations won’t change these parameters.

The ”VaxTax” also poses a problem pertaining to how healthcare resources are allocated worldwide. Its strength (and weakness) is that it allows for a system that doesn’t disincentivize current vaccine manufacturers. This means that current vaccine production would keep going without having a shortage due to disincentivized manufacturers. But this in turn plays into the current functioning of resource allocation for healthcare, which is the global market, and which is also responsible for the same inequalities the tax is meant to resolve.

There is also a point to be made that a “VaxTax” would disincentivize richer countries to mandate vaccines, even if they would be efficient to improve vaccine uptake. In this situation, the tax will force more expenses because mandates typically apply to the whole population of a given country. This will either lead to the rejection of the mandates if the tax is enforced, or to excessive expenses if both are imposed, which may in turn foster resentment against the taxation system, leading to its rejection.

Another issue is that this system of taxation, if applied, should not only be utilized for vaccines. Vaccines have the advantage of not needing a steady and permanent supply to protect, unlike treatments because they typically don’t prevent diseases. The funds from the tax could be used to increase the production and research capacities of low and middle-income countries. Numerous pathologies such as neglected tropical diseases have been affecting millions of people for decades with little attention focusing on them.

Finally, depending on the situation, the “VaxTax” could lead to counterproductive consequences. The myriad of possibilities of a “VaxTax” is situated between two opposite scenarios. In the first scenario, high income countries don’t hoard vaccines and don’t bring supplementary funds the “VaxTax”. This extreme would only happen if the “VaxTax” was sufficient in dissuading high income countries from hoarding vaccines. In this scenario, LMICs would still face the problem of funding because they would not be able to access as much as they need. But the second, opposite scenario where high-income countries still hoard vaccines, the funding may be sufficient, but the availability of the vaccines would be lacking, making a suboptimal outcome for LMICs for a reason that is not the same as the one in the first scenario. This leaves us in an uncomfortable situation where we may need to find an optimal point of taxation where we can maximize funding, availability as well as efficiency of immunization.

When trying to come up with solutions against growing inequalities between higher and lower income countries, we need to make sure that the solutions provided do bring enough performant solutions so that we reach our objectives. This solution has the advantage of being compatible with current economical organization of production and distribution. It is also a step in the right direction to suppose that more coercive systems in an international context could be implemented. Nonetheless, the “VaxTax” would be suboptimal to solve these distribution issues. If we want equal access to healthcare, we need to find better solutions that may involve more profound economical and societal changes rather than playing the market game.

Author: Nathan Petrovic

Affiliation: Master’s student at the University of Geneva.

Competing interests: None declared

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