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Experts warn against tax for NHI

Johannesburg - The elephant in the room on budget day next month will be national health insurance (NHI), said Ernst & Young's tax advisers on Thursday.

They said that while the impact on future expenditure around national health remains uncertain, it would not be good if this became "just another tax".

"We must be careful where the funding comes from," said general tax director Rob Stretch.

Stretch said South Africans are already feeling the heat from additional taxes like import duties. He noted, for example, that cars in SA cost 30% more than those in the UK.

The recent carbon emissions tax also adds to the burden - despite SA's quality of fuel being so poor that not many fuel-efficient engines can be used.

A problem is that the money goes into one pot of funds and is not earmarked for a specific area, such as fixing potholes and traffic lights.

Stretch also said there has been an inefficient use of tax incentives - like enhanced write-off incentives for greenfield and brownfield development, yet to come into operation.

The incentive programme started in 2009, but the regulatory body for approving applications is not set up yet. The touted international headquarter company regime is also facing headwinds, as exchange control legislation around it has not yet been implemented.

VAT director Charl Niemand and Dave Clegg, national tax technical director, do not expect VAT to be increased.

"It can be a can of worms," said Niemand, referring to some moves around the world to separate additional taxes from a single VAT rate. "It is exceptionally unlikely," said Clegg.

He said different rates will be impossible to manage, as was found in the past when the same thing was discussed around sales tax.

Mark Goulding, PAYE and expatriate tax director, expects social security and pensions reform to take a back seat this time due to all the other issues that need resolving.

He also believes that the NHI will not feature too prominently as a task team is still busy investigating and their report will be needed before any major announcements can be made.

Clegg said another problem that could plague the Treasury is the threat of inflation to the government's plans, in the light of oil price increases and the rand depreciating.

He is also not convinced that money can simply be thrown at the unemployment problem without first reforming rigid labour laws.

He says if attempts are made to "lean against the wind" to try to rein in the exchange rate, government must be careful that it does not "get blown over".

 

 

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