Triple tax for South Africa is coming
South African taxpayers on medical aids will be facing a ‘triple tax’ to fund the National Health Insurance (NHI) in the country—paying normal tax, losing medical aid tax credits and still having to fork out for private healthcare as the scheme rolls out on vague timelines.
The National Department of Health and Minister Aaron Motsoaledi revealed plans this past week to redirect taxes and adjust medical aid tax credits in South Africa to fund the NHI.
The Standing Committee on Appropriations was presented with a potential scheme for generating the funding requirements for NHI over a 15-year period that includes a withdrawal of medical scheme tax credits.
As part of the presentation, the department indicated that it would funnel taxes towards the NHI through various channels over this period, including, but not limited to:
- Shifting funds from national and provincial budgets
- Ending medical subsidies for civil servants;
- Reallocating medical scheme tax credits
- Payroll taxes
- Surcharges on personal income tax
The 15-year timeline was again confirmed by the department in response to a court challenge by business lobby group, Sakeliga, where it said that the government has no plans to impose additional taxes for at least the next 10 to 15 years.
While this broad and vague timeline has now been established in two official channels, the department has made it very clear that the removal of medical aid tax credits is squarely on the agenda, and it is an item it wants to address “rapidly”.
It was confirmed earlier in October that it is already in talks with the National Treasury on how to adjust these credits and redirect the resultant funds towards the NHI.
The department confirmed that it is looking at “phasing out” the medical aid tax credit “systematically”, where various thresholds for qualifying for the tax credit could be introduced over a period of time.
However, as has been the trend with communication around the NHI, the plan is riddled with contradictions and vagueness.
According to Thoneshan Naidoo, CEO of the Health Funders Association (HFA), this has also been flagged in the affidavits submitted by the NDOH in response to court challenges.
He noted that, in the department’s affidavits, it was originally said only people earning about R1 million would have their medical tax credits removed.
“Now, it is apparently going to be one-third of medical scheme members,” he said, adding that the HFA has already filed multiple objections to the responses.
The department has still not presented any official costing for the NHI.
Estimates run between an additional R200 billion and R1.3 trillion needed every year, depending on the quality of healthcare it intends to provide.
The department has repeatedly denied the extreme end of the range, but has not provided any official alternative estimate.
The full removal of the medical aid tax credit is expected to give the government an extra R34 billion to work with.
However, the resultant burden on public healthcare from medical aid members potentially dropping out of their plans due to resultant unaffordability has not been assessed.
Triple-tax for South Africa
Regardless of the timelines and specifics of the Health Department’s plans, the intention is clear, and it is one that spells disaster for taxpayers in South Africa.
Healthcare in South Africa is already considered a “double tax” service.
South African taxpayers pay income tax and VAT to the government, which then portions and budgets a large part of that to public healthcare.
Specifically, the national health budget for 2025/26 is R296.1 billion, reflecting 11.5% of the total budget.
However, given the poor state of public healthcare, households have to pay an additional “grudge tax” on medical aid to access proper healthcare in the private sector.
They get a very small portion of this back through the medical aid tax credit.
With the department’s plans to roll back the medical aid tax credit over time—and introduce further taxes down the line, like the surcharge and payroll tax—this is yet another tax on households.
Money that would have been returned to taxpayers’ pockets will instead be redirected to national healthcare, which already receives taxpayer funds through the budget.
Ultimately, taxpayers will be paying three times over to access healthcare: income taxes, medical aid contributions, and the loss of tax credits.
The longer-term plan for the NHI is to do away with medical aids almost entirely, making South Africans solely dependent on the government to pay for healthcare on their behalf.
While this would, in theory, remove medical aid contributions from the picture, at that stage of the NHI rollout, the payroll taxes and surcharges would have to be in effect to fund the scheme.
This again would leave taxpayers triple-tapped for funding: income tax, payroll tax, and surcharges.
Even after hitting taxpayers with additional charges or stripping away their rebates, there is no guarantee that the NHI will provide quality universal healthcare as promised.
Taxpayers may even find themselves having to rely on extra post-tax expenditure to continue accessing quality healthcare, making a future ‘quadruple tax’ a potential reality.
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