NO INFLATIONARY ADJUSTMENT TO MEDICAL TAX CREDITS, TO HELP FUND NHI

By Lebo Motsumi-Nkoloti Friday, February 22, 2019
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This year’s Budget Review on 20 February 2019 announced that in a bid to generate additional revenue of ZAR 1 billion in 2019/ 2020, there will be no change in the monthly medical tax credit rates for medical scheme contributions.

While taxpayers were informed in the 2018 Budget Review that medical tax credits would be increased below the rate of inflation over a three year period to help fund the rollout of the national health insurance (NHI) scheme, many would not have expected that there would be no increase in the medical tax credit rates at all this year.

There has been a mixed response to NHI since its introduction, with some South African citizens supporting the initiative (as a response to the ever-increasing medical aid rates) and some very much opposed to it, in light of Government’s failure to maintain and efficiently run the existing public health system.  Those who are against the NHI, are of the view that instead of wasting funds introducing a new public health system, Government should rather focus on improving the existing one, which should presumably come at less of a cost to taxpayers.

While many are of the view that it is unlikely that the NHI will eventually be implemented, the Minister of Finance’s announcement in this year’s budget speech that ZAR 717 billion has been allocated for health services, including the NHI, and Government’s decision not to increase the medical tax credit rates at all this year, are both indicators that the implementation of the NHI is inevitable.