Massive tax hike needed to fund South Africa’s NHI: economists

Government will need to hike taxes by an average of 10.8% to pay for the incoming National Health Insurance a new analysis in the Rapport shows.

In the analysis – commissioned by union Solidarity – Wits professor Jannie Rossouw and economist Mike Holland calculated that the new national health system will require R226 billion in financing by 2026.

The two noted that the quoted figures in the current NHI Bill are from 2010, and that the actual financing gap is currently R166.5 billion in 2019 – equal to 12.3% of government revenue for the year.

They added that the only way to cover this shortfall would be a tax hike – both for companies and individuals.

They said this could mean increases in:

  • Income tax;
  • Companies tax;
  • Payroll tax;
  • VAT.

Treasury has previously said that the rollout of the NHI will require an addition R33 billion annually from the 2025/26 financial year.

This would be in addition to the previous estimations contained in the Green and White Papers of 2011 and 2017 respectively, of R74 billion a year.

“Following the introduction of the National Health Insurance Bill in Parliament earlier this year, the Department of Health reprioritised funds within its 2019/20 budget to establish an NHI Office. Over the medium term, this office will receive increasing allocations for its operational costs,” it said.

The NHI policy aims to provide healthcare more equitably in South Africa, with a priority to improve the efficiency of service delivery.

Measures being undertaken for the rollout include improving the management of patient records, for example by rolling out the health patient registration system to streamline management processes in health facilities.

Initially, NHI costs were projected to increase public health spending from about 4% to 6% of Gross Domestic Product (GDP) over 15 years.

“However, given the macroeconomic and fiscal outlook, the estimates to roll out NHI that were published in the NHI Green Paper in 2011 and White Paper in 2017 are no longer affordable,” Treasury said.

Read: The 3 major problems with South Africa’s new NHI – and why some doctors want to leave

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Massive tax hike needed to fund South Africa’s NHI: economists