Medical scheme tax credits to go to NHI

Cape Town - Tax credits for medical aid contributions is a first taxation step towards the introduction of the national health insurance (NHI), SA Revenue Service (Sars) commissioner Oupa Magashula said on Thursday.

"It is a first step I think to prepare for a proper base, an equitable base for the introduction of the national health insurance later on," he told Sapa.

"You can't use a deduction system because national health systems around the world... work around a credit system."

Finance Minister Pravin Gordhan announced in his budget speech on Wednesday that the credit system would be introduced on March 1, at a rate of R230 a month for the first two beneficiaries and R154 for every further beneficiary.

Magashula was speaking after a post-budget briefing by National Treasury and Sars officials to parliament's standing committees on finance and appropriations.

He explained to MPs that scrapping the deductions system would mean slightly more rands and cents for lower income medical aid members than for their wealthy counterparts, who would effectively get less income tax relief.

The change would not make much difference to the state's revenue intake, he said, but socially it would be more fair.

The budget review put it thus: "Medical tax credits are a more equitable form of relief than medical deductions because the relative value of the relief does not increase with higher income levels."

Gordhan in his budget speech said that the state would need an extra R6bn for the NHI in 2014/15. This could be funded through an increase in VAT, a payroll tax on employers or a surcharge on the taxable income of individuals, he said.