The Relationship of “Tax-Exemption” and “Community Benefit Service” of Not-for-Profit Hospitals.

Abstract

Purpose: the government often indirectly subsidizes nonprofit organizations by tax benefit to encourage their engaging in community benefit service. This paper discusses the association between community benefit service expenditure and the tax exemption interest of not-for-profit hospitals in Taiwan. The findings of this paper can help understand the effect of tax benefit to encourage not-for-profit hospitals to engage in community benefit service. Method: in this paper, we use the 2006-2010 data of 44 not-for-profit hospitals in Taiwan to estimate panel data fixed effect model in the analysis of the association between the tax exemption interest and the expenditure of medical juridical persons (no-for-profit hospitals) on uncompensated care services and educational research activities or community benefit service with controlled hospital characteristics and environmental characteristics. Results: regression results show that tax exemption interest has a negative relationship with uncompensated care services spending, a positive relationship with and educational research and development spending, and no significant relationship with and community benefit service spending. Conclusion: the public and authorities generally consider the main purpose of granting not-for-profit hospitals tax benefit is to encourage medical social activities such as providing free medical care to healthcare have-nots rather than improve research momentum or educational quality, and educational research activities indirectly related to community benefit. Empirical results show that gaining tax exemption interest can make a positive contribution to not-for-profit hospitals in engaging in educational research activities, but is in a reverse relationship with uncompensated care services. Tax exemption interest and total expenditure of community benefit service are not significantly related possibly because the providing of community benefit service by the not-for-profit hospitals is mainly affected by other factors or the tax-free status has nothing to do with the providing of community benefit service.