The Treasury has confirmed it is investigating the implications of limiting medical tax credits, and told Business Day it had “had engagements with the Health Department”. However, Finance Minister Enoch Godongwana had not made any announcements or stated any policy position on the issue.
Various potential implications were possible if the credits were reduced or removed, and “these are being investigated internally”, it said.
The issue has come to the fore after two presentations to Parliament last month in which the Health Department proposed its plans to scrap these credits, starting with high-income earners.
Last week it indicated phasing out medical tax credits could begin as early as April next year.
The Treasury drew attention to the fact that it had not increased medical tax credits in line with inflation in recent years.
The savings had been used to bolster the Health Department’s expenditure on preparation for NHI, but that had been done indirectly through the budget process rather than explicitly ring-fencing the savings for that purpose, it said.
The government provided R30.4bn in tax credits to medical scheme members in 2022/2023, and a further R9bn in tax credits for qualifying out-of-pocket healthcare expenditure.
Deputy DG for NHI Nicholas Crisp said last week that the initial target would be people earning more than R750 000 a year. His presentation to MPs suggests that phasing out medical tax credits would shift R11bn to NHI in the 2026/27 financial year and R34bn a year after that.
However, critics say eliminating the credits will disproportionately affect lower-income households, older people and those with disabilities.
Business Day article – Treasury investigating changes to medical tax credits (Restricted access)
See more from MedicalBrief archives:
Richest medical aid members first to lose tax credits – Crisp
HFA opposes proposed medical scheme tax credits’ removal
Medical aid tax rebates to go to NHI