Higher taxes on the cards as government scrambles to implement NHI
JOHANNESBURG – South Africa’s embattled consumers are set to see a rise in taxes as the government scrambles to implement the much-touted National Health Insurance (NHI) scheme.
The NHI Bill, which was tabled in Parliament last week, has drawn both praise and scorn.
The National Treasury had estimated that NHI will cost R256 billion, but has said that the department plans to release a revised paper with a revised costing.
Raymond Parsons, an economist at the North-West University Business School, said factors such as declining tax revenues, escalating debt ratios, an excessive public sector wage bill and extensive financial assistance to state-owned enterprises like Eskom leave little room at this stage for large-scale projects such as NHI.
“South Africa needs to know the financial implications of this massive health scheme before irrevocable decisions are taken, which could be economically damaging. There are no soft options available, especially for as long as the economy remains in a ‘low-growth trap’,” Parsons said.
“The forthcoming Medium Term Budget Policy Statement will therefore need to bring these hard fiscal decisions into sharp focus, and in particular indicate whether the costs of a NHI can indeed fit into the deteriorating overall fiscal picture.”
Data from Statistics South Africa released in May showed that more than 47 million South Africans did not have medical scheme cover, with just 9.4 million people enjoying the benefit.
The statistics agency said that between 2002 and 2018, the percentage of individuals covered by a medical scheme increased marginally from 15.9 to 16.4 percent.
The Free Market Foundation (FMF) said that taxes will have to rise to fund the NHI scheme.
“During these dire economic times, the NHI tax will be the final nail in the coffin for cash-strapped consumers struggling to make ends meet,” the FMF said.
“While supposed to help people access medical care, the NHI scheme will undermine any chance of economic success by either cutting wages or eliminating jobs altogether and will entrench South Africa’s terminal economic conditions.”
The bill states that NHI will be funded through payroll taxes for employees and employers, a surcharge on personal income tax, the reallocation of medical scheme tax credits to the fund and general taxes.
Cosatu’s parliamentary co-ordinator, Matthew Parks, said President Cyril Ramaphosa was providing leadership and stewardship on the NHI implementation process.
“Cosatu, together with like-minded organisations, has on an ongoing basis called for the speedy release of the NHI Bill as a step closer towards the realisation of quality health care for many vulnerable groups,” Parks said.