Minister’s NHI headache
ALREADY UNDER PRESSURE, GODONGWANA EXPECTED TO RAISE AT LEAST R200BN
South Africans are waiting to see what Finance Minister Enoch Godongwana does with the hospital pass he received from Cyril Ramaphosa in the State of the Nation Address this month, when the president made all kinds of promises that he must find the money for in what was more of an elections speech.
One of the biggest worries for ordinary taxpayers and medical aid members is how the government will try to find the money to pay for the National Health Insurance (NHI), which could cost the country much more than the government’s predicted R200 billion a year.
Currently, taxpayers who are members of a medical scheme can claim a tax rebate of R347 a month for the main member and R234 a month for every additional member, but the rebate will likely fall away when NHI is introduced.
And this is not the only tax implication. According to a report by FTI Consulting on the macroeconomic implications of NHI, taxpayers will have to fork out a significant amount of money every month to fund universal health care for all.
During a department of health presentation in December 2022, it said it would require an extra R200 billion per year to fund the NHI, but FTI Consulting warns this could be as much as R600 billion per year.
FTI Consulting says since there are no details available about the
NHI benefit package, the cost, or how these funds will be raised, its calculations were based on a figure of R200 billion as an illustrative value.
Nevertheless, to raise R200 billion in the current fiscally constrained environment, assuming the number of taxpayers and their spending remains constant, FTI Consulting says it will require that VAT increases from 15% to
21.5%, that personal income tax rates increase by 31% across the board or formally employed taxpayers pay a payroll tax of an estimated R1 565 per month.
Craig Comrie, Health Funders Association (HFA) chair, says changes to taxation can only be introduced by the minister of finance in a money Bill.
“Medical schemes and their members should be aware that the NHI Bill has no power to implement tax changes.”
If it becomes necessary, the HFA will strongly oppose any proposed legislation to this effect through all available avenues, not only to safeguard the rights of medical scheme members but also because it does not make economic sense for the country and its people, he said.
“Removal of the tax credits
would effectively increase medical scheme members’ tax and stifle what little disposable income remains to stimulate our economy.
“Medical scheme members are already contributing substantially to the public health system by not using it and therefore the tax credits provide partial compensation by reducing the tax they pay, depending on how many dependants they have.”
Comrie says the public health budget is more than the tax credit amount of about R5 000 per person per year. “Therefore, medical scheme members receive a benefit that is much lower than the benefit nonmedical scheme members currently receive.
“In addition, more than half of people who belong to medical schemes have a monthly household income below R30 000 and the tax credit is a key factor in their ability to afford cover.”
For a family of four, removing medical scheme tax credits would effectively result in a monthly loss of R1 220 in household income, or R14 640 a year.
“For some families, this would make private healthcare cover unaffordable, thereby transferring 400 000 to 700 000 more people onto an already overburdened public health system.”
Prof Bonke Dumisa, an independent economic analyst, described NHI as it stands as “an ideological stubbornness aimed at showing the ANC as politically relevant”.
“Common sense dictates that medical tax rebates will cease to exist if an NHI-related tax is imposed.”
However, he says, government forgets that less than 30% of the population are on a medical aid, therefore hoping people will use the money less than 30% of the population contribute for the whole population, does not make sense.
Jürgen Eckmann, wealth manager at Consult by Momentum, warned Godongwana “will be forced to cut social, state and infrastructure expenditure, which is bad news in an election year and unlikely given the president’s promises, increase taxes, which has its own implications, or a combination of both”.
“I believe we are unlikely to see a hike in VAT or corporate income tax in an election year.”
What about personal income tax? Eckmann says considering November’s medium-term budget policy statement indicated that an additional R15 billion in taxes must be found and the deficit then was anticipated to hover around 4.9% rather than the six percent in December, consumers must be on high alert status.
Financing universal health likely to cost at least R600bn a year.
NHI is an ideological stubbornness aimed at showing the ANC as politically relevant.
Prof Bonke Dumisa Economic analyst