Taxpayer ‘exodus’ warning for South Africa

National Health Insurance is law in South Africa, but it may cause a massive wave of emigration amid fears over tax and medical quality.

Weeks prior to the 2024 national election, President Cyril Ramaphosa signed into law the NHI Act despite widespread criticism of the law in its current form.

Roxanna Naidoo from Tax Consulting SA said that there are three significant issues that the NHI centres on.:

• Who will foot the bill?

• Will all doctors and healthcare workers now work directly for the government?

• Will all South Africans be forced to use government-quality healthcare?”

The opinions of South Africans, including those abroad, are important, as they will bear the cost and utilize the standardized medical services in the new dispensation.

Tax Consulting SA thus initiated a survey to gauge South African taxpayers’ feelings about the NHI, which highlights their primary concerns, hopes, and fears.

Funding

More than 50% of respondents said that they believe a direct tax increase would fund the NHI.

The NHI Act said that possible funding sources include a surcharge on personal income tax, removal of the medical tax credit and reallocation of most of the provincial health budget to the NHI fund.

“Clarity has not been provided as to when this will take effect, as it has been advised that the implementation will take place gradually,” said Naidoo.

“The surcharge on personal income tax, employee payroll taxes and a removal of the medical tax credits signals a significant tax burden for SA taxpayers, a fear raised by the participants on the NHI survey.”

Brain Drain

The survey shows that another primary concern is the potential brain drain of medical professionals due to the NHI.

81% of respondents said that implementing the NHI would lead to a significant exodus of medical professionals.

This would severely impact the function of the healthcare system, as losing skilled medical workers worsens existing challenges in providing quality healthcare.

82% of respondents said that they foresee a negative impact on healthcare quality due to the NHI, indicating a lack of confidence in the NHI’s ability to improve access and standards.

“Illustrating many South Africans doubt the government’s capacity to implement the NHI effectively and fear that it may lead to deterioration rather than improvement in healthcare services.”

Taxpayers heading abroad

Concerns over funding could lead to more than skilled healthcare professionals heading for the door.

37% of respondents said that they were worried that the government would target wealthy taxpayers or people with people high-value assets to fund the initiative.

47% also said that they might financially emigrate due to the long-term impact on South Africa or consider emigration to a country with better medical care.

“This is no surprise as practitioners have noticed a significant spike in doctors consulting emigration experts as well as the elderly and medically at risk, seeking better medical care abroad.”

“An increase in wealthy and high net worth individuals looking for a plan B option abroad has also been noted, with many seeking better opportunities for their families outside SA as well as protection of their wealth from the SA tax net.”

Support

Regarding support for the NHI, 84% of respondents unsurprisingly opposed it, predicting higher costs and less access to qualified healthcare as a result.

The strong opposition echoes widespread concern about the NHI’s potential economic and practical implications.

“A majority of 77% of respondents viewed the NHI as a political manoeuvre rather than a genuine effort to equalize healthcare access.”

“This suggests that many South Africans are sceptical about the government’s intentions, believing the timing of the NHI implementation to be politically motivated, given its close proximity to election periods.”

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