It is likely the NHI will start soon, seen that the president said that he is looking for a pen to sign the NHI Bill into law. All taxpayers who are members of a medical scheme will be affected if NHI is somehow brought to life. Currently, taxpayers who are members of a medical scheme qualify for a medical tax credit or rebate of R364 per month for the first 2 members and R246 per month for every additional member. This rebate will likely fall away when National Health Insurance (NHI) is introduced. Sadly, this will not be the only tax implication for taxpayers.
Taxpayers will have to pay a significant amount of money each month to fund universal health care for all. During a presentation in December 2022, the Department of Health said it requires an extra R200 billion per year to fund the NHI, but FTI warns that this could be as much as R600 billion per year. R200 billion is purely an illustrative value, since there are no details available about the NHI benefit package, the cost of the NHI, or how these funds will be raised. Nonetheless, to raise R200 billion in the current fiscally constrained environment and assuming that the number of taxpayers and their spending remain constant, FTI says it will require that VAT increases from 15% to 21.5%, personal income tax rates increase by 31%, or formally employed taxpayers pay a payroll tax of an estimated R1 565 per month.
However, 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.
Removal of the tax credits would effectively increase medical scheme members’ taxes and tighten what little disposable income remains to stimulate our economy.
Putting an end to the medical scheme tax credits would effectively result in a monthly loss of R1 220 in household income, or R14 640 per year. For some, this would make private healthcare unaffordable, thereby transferring at least 400 000 to 700 000 more people onto an already overburdened public health system.
According to Herman van Papendorp, head of investment research and asset allocation at Momentum Investments, there is a chance that medical tax credits could be adjusted as a potential mechanism to fund the NHI.
The SA Institute of Taxation estimates that this works out to R4 400 per year for an individual taxpayer and up to R14 000 per year for a family of four, which is received in the form of a nonrefundable rebate that reduces total tax paid.
The NHI is a complex initiative, and a considerable amount of effort is needed to make it work. It is our hope that the President will send the Bill for constitutional review before it is signed into law and enacted.
For any queries, please contact Kirsten Mitchell kirsten@resolutewealth.co.za
