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Publication Detail
NTRC TRJ: Feasibility of Imposing an Excise Tax on Cosmetic Medical Procedures

The paper seeks to provide a profile of the cosmetic surgery industry in the Philippines with the end in view of proposing a tax on cosmetic surgeries and minimally invasive procedures not deemed medically necessary to raise additional government revenue. Given the growing popularity of cosmetic medical procedures in the Philippines, said services should be taxed as these are deemed to be unnecessary, not life-threatening and nor required for survival and only a privileged few who will undergo said procedures would bear the tax. Plastic surgery can be categorized into cosmetic and reconstructive surgery. Cosmetic surgery is a subspecialty of medicine that uniquely restricts itself to the enhancement of appearance through surgical and other medical techniques. On the other hand, reconstructive surgery is a surgical specialty that deals with the reconstruction of facial and body tissue that requires reshaping or remolding to correct a condition in order to approximate a normal appearance or to repair working ability. There is no clear distinction between cosmetic, and reconstructive surgery because both have aesthetic aspect. However, unlike cosmetic procedures that are deemed non-essential, reconstructive surgeries are considered vital as they are mostly concerned with correcting the deformities that are congenital (in-born) or acquired from accidents or aging, in order to restore or enhance form and/or function. Informal surveys on cosmetic surgery procedures show the popularity of rhinoplasty, breast augmentation, blepharoplasty, liposuction and abdominanoplasty. Meanwhile, the top five (5) minimally invasive procedures are Botalinum Toxin Type A (Botox), soft tissue fillers, chemical peel, laser hair removal, and dermabrasion. The estimated average prices of cosmetic surgical procedures in the country range from PhP56,600.00 (blepharoplasty) to PhP190,000.00 (breast augmentation). For minimally invasive cosmetic procedures, the average prices range between PhP14,300.00 (laser hair removal) to PhP34,100.00 (autologous fat injections). At present, a 12% VAT is imposed on the services rendered by doctors of medicine duly registered with the Professional Regulation Commission (PRC) with gross receipts exceeding PhP1,919,500.00 derived from sale or exchange of service. Accordingly, doctors can claim input VAT on purchases related to the practice of their profession as long as these expenses are supported by receipts issued in their name. Those who are exempt from payment of VAT and who are not VAT-registered shall pay a tax equivalent to three percent (3%) of their gross quarterly sales/receipts. In the past, several bills proposed a 20% excise tax on non-essential services, including but not limited to, cosmetic surgery. The objective of the bills was to broaden the scope of the definition of non-essentials to include non-essential services or procedures such as cosmetic surgeries and body enhancements undertaken for aesthetic reasons. This will enhance the progressivity of the tax system because it places the tax burden on those who have the means to pay for luxury goods and services. The tax proposal would be a good revenue source for the government because cosmetic surgery is considered to be a booming industry in the Philippines. Moreover, the proposed tax may be viewed to be income elastic, since revenues are expected to increase as income goes up. The tax burden will be borne by those who are generally in the middle and upper classes who presumably have the money to spare for these costly services. Based on an annual estimated 614,120 surgical and non-surgical procedures performed by 1,180 registered plastic surgeons and dermatologists and, the prevailing prices of cosmetic procedures in the country, the government could generate estimated revenues amounting to PhP7.95 billion representing PhP6.39 billion for cosmetic surgery procedures and PhP1.55 billion for minimally-invasive procedures. The possibility of patients traveling to neighboring countries to avail of the said services is not farfetched. However, the availability of licensed, highly-trained and English-speaking local physicians and dermatologists as well as the caring nature of Filipinos are only some of the advantages that the country have over its neighbors that would very well compensate for the negative impact that the proposed tax may cause on the said industry. The proposed tax would also be a way to strictly regulate the cosmetic surgery industry in the country. At the moment, although the said industry is growing, it still remains somewhat under regulated thus, some procedures are done by unlicensed or untrained surgeons or individuals. There is also no credible and reliable baseline information regarding surgical and non-surgical cosmetic procedures performed in the country unlike in the USA, UK, South Korea, among others. Hence, it is hoped that with the proposed tax on cosmetic procedures, adequate and pertinent information would be available. There is a need to define/specify the coverage of the proposed tax taking into consideration that certain procedures are for well-being purposes while others are for aesthetic purposes. Failure to do so would result in inequity in the case of the former, or tax leakages/abuses for the latter. If the proposed tax pushes through, the BIR should have proper coordination with cosmetic surgery providers to ensure that the proposed tax would serve its purpose of providing additional revenue to the government. Also, there should be an effective tax enforcement plan to ensure that the optimal revenue is collected. The revenue to be collected from the proposed tax could be used to finance health related programs and projects of the DOH. It can be used to fund surgical and medical missions of the government particularly for indigents who need to undergo plastic and reconstructive surgery to correct a physical condition. Also, the proceeds may be used to improve and upgrade the facilities of public hospitals.

National Tax Research Center
Authors Keywords
NTRC; Cosmetic Medical Procedures; Excise Tax ;
Download PDF Number of Downloads
Published in 2014 and available in the NTRC Library or Downloaded 115 times since May 06, 2019
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