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Johannesburg – While Finance Minister Pravin Gordhan last week bolstered hopes that taxpayers won't face large tax rises in 2011, the tax implications of the new national health insurance (NHI) scheme remain unclear.
Gordhan announced in his medium-term budget speech that revenue collections were currently R31bn higher than expected, coming mostly from VAT collections and improved retail spending.
The Treasury therefore could slash its budget deficit for the current fiscal year to 5.3% of gross domestic product, compared with its previous forecast of 6.2%.
"This means that tax increases next year should be lower than originally envisaged,” said AJ Jansen van Nieuwenhuizen, head of tax at Grant Thornton Johannesburg.
But he warned that the NHI, planned for 2012 and yet to be funded, will have a "significant" impact on next year's tax increase decisions.
Earlier, the ANC said the NHI will be funded by an additional income tax (estimated to be between 3.5% and 5% on all salaries), possibly a VAT rise and the scrapping of tax deductions on medical aid contributions.
Gordhan this week only committed to the introduction of "amendments to improve the fairness of the tax treatment of medical scheme contributions".
"No, not yet," was his response at a press briefing after his speech, to the question on whether increased taxes will pay for the NHI.
It is important that the government shares tax implications and changes to the tax environment sooner rather than later to enable all healthcare players to have a meaningful input into the way forward, warned Len Deacon, CEO of the medical scheme TopMed and a board member of Board of Healthcare Funders.
"It was anticipated that changes may have been made to the medical tax subsidy and VAT, as an initial funding mechanism for NHI implementation. I am keen to see what the details are of the (tax treatment of medical schemes) amendments," he added.
Instead of focusing on tax, Gordhan emphasised the need to cut waste in the health system, made changes in the way provincial health budgets will be allocated and gave an extra R7.3bn to address priority health issues over the next three years.
A new system to bolster family healthcare will also be launched, involving contracting in independent general practitioners.
“With respect to improving family healthcare as part of an enhanced primary care system, I welcome government's focus on primary care as opposed to tertiary care. This is important for bringing down costs and putting the control back with the GPs in terms of coordination of care,” said Deacon.
- Fin24
