Tuesday, 25 June, 2024
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Income tax hike and payroll tax proposed for NHI funding

A recently circulated fact sheet on funding for the National Health Insurance (NHI) scheme suggests that both a payroll tax and a surcharge on personal income will be imposed on South Africans, with employers and employees contributing to the payroll tax in the same way they contribute to the Unemployment Insurance Fund (UIF).

Compiled by the Health Department and the Presidency, the document does not say at what level these taxes would be applied, reports News24.

It adds that the NHI taxation system “must not create an increased burden on households” compared with the current system.

However, a payroll tax like that used by the UIF would apply equally to all employees in the formal sector, including the 7m people below the threshold for personal income tax.

It warned that the proposal for a payroll tax levied on both employers and employees would raise the cost of employment for employers, and mean lower take-home pay for workers.

Meanwhile, influential London-based think-tank Chatham House says that South Africa should get over its fears about NHI – that if the country has the money and political will, it could be a remarkable success.

Robert Yates, executive director of the Centre for Universal Health at Chatham House – which advises governments on UHC – who was in SA recently, said an NHI scheme was long overdue, and that SA needed to catch up with the global movement towards universal health coverage.

SA’s dual health system, which is an expensive private health sector for a small portion of the population and an under-funded public system for the majority, is similar to that in the US, where healthcare has become “monumentally expensive”, he added.

“Private medical aid actually represents pretty poor value for money in that it’s very expensive. You are paying high premiums and very high administration costs. The US is an extreme version of that, where they spend 18% of their GDP on their health system,” he said.

SA spends 8.5% of GDP on healthcare, if government spending on public healthcare and spending in the private sector are added together. In 2021, R277bn was spent in the private sector and used by 16% of the population, and R265bn, spent in the public sector, was used by 84%.

Yates said that if SA remained on this dual system, the cost of private healthcare would continue to escalate, resulting in the country reaching the extremes in the US, where healthcare many people’s reach.

“Moving to a predominantly publicly financed health system is the global trend … What has happened in Europe and Australasia and great chunks of Asia is that they’ve tried to force these systems together, and obviously, this is a very political process.

“The big political debate here in SA will be how the middle classes feel about that and whether they feel confident that the new system will continue to provide them with the good quality health services they need.”


News24 article – News24 article – New payroll tax and income tax hike needed for NHI, new govt factsheet suggests (Restricted access)


News24 article – Get over yourself, SA, and get on with NHI, says Chatham House (Restricted access)


See more from MedicalBrief archives:


NHI pilots point to critical fault lines


Parliament passes NHI Bill but long road to implementation


NHI ‘will lead to emigration, corruption’


Certificate of Need ‘legal mess’ threatens NHI





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