VAT would effectively have to be doubled to pay for NHI: Solidarity

Trade union Solidarity has raised concerns about the massively negative impact the proposed National Health Insurance (NHI) will have on taxpayers.

According to Morné Malan, a researcher at the Solidarity Research Institute, the government’s total tax income is currently just more than R1 trillion – of which more than a third would have to go to the NHI.

Malan said that it is improbable that the government will cut on expenditure elsewhere, and that it was therefore difficult to determine where the additional money to fund the NHI will come from.

“It will take as much as 70% of personal income tax, or even as much as 99% of the income through value added tax (VAT) to provide for the deficit,” he said.

“Therefore, to continue with the same services which are currently funded by VAT, as well as provide for the shortfall regarding the NHI, VAT will effectively have to be doubled, which presumes that people’s spending patterns will stay the same – which will definitely not be the case.”

Incorrect estimates

Malan also raised concerns about the government’s estimates as to the scope and cost of the proposed project.

He noted that government has based its numbers on the presumption that the economy will continuously grow at a rate of 3.5%, while South Africa is currently not even close to this growth rate.

“According to the government’s calculations in the white paper, the NHI will need approximately R256 billion by 2025, of which R72 billion will be a deficit on current government expenditure on healthcare,” he said.

“What is even more worrying, is that the number for NHI funding is rather closer to R357 billion with a deficit of approximately R210 billion. It is simply madness to assume that this deficit can be eradicated by taxes,” Malan said.

Read: NHI will be bigger than Eskom and SAA combined – so why aren’t people more worried about it?

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VAT would effectively have to be doubled to pay for NHI: Solidarity