4 taxes that could fund South Africa’s NHI – including 20% VAT

A new report published by trade union Solidarity shows that the planned introduction of South Africa’s National Health Insurance (NHI) will lead to an estimated budget shortfall of at least R112 billion.

This is significantly higher than the government’s projections of a R32 billion shortfall and provides a more ‘realistic’ figure for what the system will actually cost, Solidarity said.

However, the trade union said that even the R112 billion figure is a conservative estimate which only accounts for current public healthcare and private hospitals, with smaller private health service providers not accounted for in the calculation.

Solidarity further warned that borrowing money to fund this deficit should not be considered because the country already owes billions of rands and cannot afford more debt.

The trade union also believes that the deficit cannot be supplemented by taxes either, as the South African taxpayer is already overburdened.

Solidarity’s calculations show that the government could theoretically generate R112 billion in 2026 in the following ways:

  • An income tax surcharge of 20%
  • A VAT increase from 15% to 20%
  • A payroll tax of 5.5%
  • Increasing corporate income tax from 28% to 42%
  • Any combination of these

“Every single one of us is already bending over backwards to finance deficits in the form of loans that the government has entered into on our behalf,” said Solidarity chief executive Dr Dirk Hermann.

“We are paying for the corruption of government officials and cadres, and the services we receive are getting poorer and poorer while the wallets of government officials are getting fatter. We cannot give any more, and we especially cannot give any more for a system controlled by a corrupt and incompetent government.

“They have already proven during the Covid-19 pandemic that they do not have the capacity or the integrity to manage our country’s health and finances.”

Solidarity said that South Africans would benefit more if the state reforms its current public health system by ensuring better returns on investment.

In addition, the private sector should be permitted permanently to alleviate the burden of the public health system by continuing to provide excellent services to those who can afford them.

“Through maintenance, upgrading and more efficient systems, the public health sector will be able to provide better service to millions of South Africans.

“In addition, medical practitioners must be allowed to provide their service privately to anyone who wants it and can afford it. Forcing the whole country to depend on the state uniformly is not the answer,” Hermann said.

Read: Bad news for jobs in South Africa

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4 taxes that could fund South Africa’s NHI – including 20% VAT