Tax change not major US worry for F & P

Mike Daniell. Photo / Paul Estcourt

Fisher & Paykel Healthcare says it is keeping a close watch on proposed legislation in the US to tax medical devices but believes any effect on the business is likely to be minor.

Two separate bills have been put forward to help recover the cost of providing extra healthcare to millions of Americans by taxing companies that would benefit the most from the spend - namely healthcare device makers.

Initial talks put the corporate tax charge as high as US$4 billion ($5.51 billion) but a recent watering down of the legislation has halved that and tightened the rules for whom it will apply.

Mike Daniell, chief executive of Fisher & Paykel Healthcare, which gets 46 per cent of its revenue from selling sleep apnoea and breathing devices into North America, said there was a possibility of the proposed tax having a small effect on the company.

But he believes that would be more than off-set by the added sales it could make under President Barrack Obama's new health regime.

The regime is expected to allow an extra 30 million Americans health cover without needing to have private medical insurance.

Daniell said the proposals put the tax at around 2 per cent of revenue but it would apply only to certain categories of devices.

The Senate bill proposes one category of devices that wouldn't be taxed and another category where items over US$100 would be taxed while the House bill excludes all devices sold in retail stores.

Daniell said around 75 per cent of its business would not be affected if the US$100 rule was applied.

He said it was still not clear at what stage the tax would apply - whether Fisher & Paykel Healthcare would pay or if those who bought its pro-ducts would pay when they onsold them.

"There is a lot of uncertainty yet."

Daniell said if the tax was introduced it was likely that Fisher and Paykel would try to pass it on.

"We will cope with whatever happens," he said.

"At this point we are not expecting it to have a significant effect. We have looked at it and we are comfortable."

The legislation is not expected to be finalised until the new year and there are still major differences over when it would kick in, with the Senate bill suggesting 2010 and the House bill delaying the tax until 2013.