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Johannesburg - A major proposal in the budget was that medical deductions be converted to credits against income tax, but a Treasury official admits there is much division within Treasury itself on the proposal.
A discussion paper on the proposal is due next month and the aim is to have the system in place from March next year.
At a Mazars tax conference on Thursday, Greg Smith said that there were "two camps" in Treasury on the proposal, with one saying it was not a good idea.
"It has merit from an equity perspective to address imbalances," said Smith. However, this would come at the expense of higher income groups.
Smith said one concern was that all deductions convert to a credit system as it could be seen as "a great way to address inequalities".
National tax director for Mazars, Johan Troskie, said there would be a greater benefit in the long run from credits than deductions. "The move seems positive."
The equity from the credit system results because the relative value of relief would not be increased, because the relief would not increase as marginal rates increased - so if someone got 200 rand back at a 40% rate, someone at a 10% rate would also get 200 rand back.
The Budget announced that the medical aid contribution deduction amount would be raised from 670 rand to 720 rand for the first two beneficiaries.
The Budget also added more mustard to the National Health Insurance debate, noting that funding mechanisms could include higher VAT. Other sources could be a payroll tax, or a surcharge on individual income tax.
Smith felt unions would not like the idea of increasing VAT, while a payroll tax would raise the cost of employing a person. There is also plenty of emotion when individual taxes are raised, especially if 2% were added.
"We are waiting for comments from the public on how to deal with it," said Smith.
However, he felt, a solution might be to scrap medical deductions as this would raise a large amount of money.
A discussion paper on the proposal is due next month and the aim is to have the system in place from March next year.
At a Mazars tax conference on Thursday, Greg Smith said that there were "two camps" in Treasury on the proposal, with one saying it was not a good idea.
"It has merit from an equity perspective to address imbalances," said Smith. However, this would come at the expense of higher income groups.
Smith said one concern was that all deductions convert to a credit system as it could be seen as "a great way to address inequalities".
National tax director for Mazars, Johan Troskie, said there would be a greater benefit in the long run from credits than deductions. "The move seems positive."
The equity from the credit system results because the relative value of relief would not be increased, because the relief would not increase as marginal rates increased - so if someone got 200 rand back at a 40% rate, someone at a 10% rate would also get 200 rand back.
The Budget announced that the medical aid contribution deduction amount would be raised from 670 rand to 720 rand for the first two beneficiaries.
The Budget also added more mustard to the National Health Insurance debate, noting that funding mechanisms could include higher VAT. Other sources could be a payroll tax, or a surcharge on individual income tax.
Smith felt unions would not like the idea of increasing VAT, while a payroll tax would raise the cost of employing a person. There is also plenty of emotion when individual taxes are raised, especially if 2% were added.
"We are waiting for comments from the public on how to deal with it," said Smith.
However, he felt, a solution might be to scrap medical deductions as this would raise a large amount of money.
