IRR asks Treasury: Where is the money for NHI going to come from?

How is the National Health Insurance (NHI) going to be funded? This is a key question that the Institute of Race Relations (IRR) has asked the Ministry of Finance.

The IRR has written to the Ministry to inquire about a key component of the government’s revenue sources that could be under threat with the imposition of the NHI.

Says Makone Maja, IRR Campaign Manager: “The NHI has been a long time coming yet years after the policy was first proposed and months after the Act was passed, there is still no comprehensive proposal about how it will be funded.

“The 2017 NHI White Paper contains the government’s latest estimates on the funding model. It states that once medical aids are collapsed into the single source of government administered insurance, only R72bn additional revenue would be required to get the NHI fully operative in 2025.”

Maja notes that a significant proportion of government revenue is collected from a limited number of individual taxpayers and corporations, and that Treasury’s 2024/25 estimates account for just over 860,000 individuals paying near a fifth of gross tax revenue. In addition, she says, a joint Treasury and South African Revenue Services (SARS) publication noted in 2021 that only 842 companies contributed over a tenth of all taxes.

“Despite these few taxpayers carrying a disproportionate share of the country’s tax burden,” Maja continues, “the White Paper envisages adding more to the load through a combination of additional taxes to make up for a potential shortfall.”

Maja notes that the White Paper also enlists a 4% surcharge on taxable income; an increase in Value Added Tax (VAT) by one percentage point; and a new payroll levy. Adding to the tax burden in this way risks triggering an exodus from among the key cohort of taxpayers.

Says Maja: “The Institute would like to know if Treasury has investigated the value of the contributions of these core taxpayers to the state’s revenue, and future stability, and whether they have conducted polling or modelling to gauge whether these individuals and companies would emigrate if the NHI was foisted on them.”

Maja concludes: “The future stability of the country depends on widening our tax base, which can only be achieved through rapid economic growth. Treasury needs to clarify the opportunity cost of the NHI to enable the country to comprehend the multitude of imminent risks it poses."

Media contact: Makone Maja, IRR Campaign Manager Tel: 079 418 6676 Email: makone@irr.org.za 

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za