Taxpayers to finance the NHI
The government will cut medical aid tax credits in South Africa. This is to fund the National Health Insurance (NHI).
The Department of Health confirmed that government will cut medical aid tax credits in South Africa. This is to fund the National Health Insurance (NHI).
The government will fund the NHI through tax hikes, new taxes and removal of tax rebates. The cost of the NHI is estimated at R600 billion a year.
TAXPAYERS TO FOOT THE BILL
WHAT IS A MEDICAL TAX CREDIT?
A medical scheme fees tax credit is a rebate used to reduce the normal tax a person pays, according to the South African Revenue Service (SARS). It applies to fees paid by a taxpayer to a registered medical scheme. Principal members of a registered medical aid scheme get a tax reduction of R364 per month, according to Business Tech.
The aim of this credit is to achieve more equality in the treatment of medical expenses across all income groups.
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HOW WILL THIS AFFECT TAXPAYERS?
The NHI will mean people “would have access to the same clinic or hospital closer to where they live or work without paying – the government will pay,” said health minister Joe Phaahla.
Phaahla made it clear that one way or another, taxpayers will be footing the bill. Everyone “will contribute to this fund through taxes and contributions in line with what we can afford,” he added.
Thus, saying that the government will pay, translates to the taxpayers will pay.
With the NHI Bill signed into law, the government will proceed with its plans to find the funding it needs.
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RAMAPHOSA: “WILL HAPPEN WHETHER THEY LIKE IT OR NOT”
According to a report by the Solidarity Research Institute (SRI), the NHI plan requires R295.93 billion. The country’s strained budget and taxpayers cannot afford this.
“This is unheard of for a middle-income country, where spending on education usually enjoys the highest priority,” said the SRI.
In addition to abolishing the medical tax credit (about R30 billion), the following tax changes are likely:
- A 40% surcharge on income tax
- An increase in VAT to 22%
- A payroll tax of 13.4%
- An increase of corporate income tax to 45%
The SRI said that none of these is a realistic possibility as SA taxpayers are already overtaxed. They called these hypothetical suggestions absurd.
Even though it is unlikely that the government will put these measures into action any time soon, the removal of rebates could be a quick and easy stopgap, according to Business Tech.
President Ramaphosa confirmed in an address earlier this month that the government will implement the NHI. He said it will give everyone access to free healthcare.
“This is going to happen whether they like it or not,” he said. “There has been huge opposition against the introduction of the NHI. I can say … it will go ahead.”
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