Explainer: How much more tax you will need to pay to fund NHI

Explainer: How much more tax you will need to pay to fund NHI

- Parliament tabled its NHI Bill last week

- The bill is aimed at providing health insurance to South Africans

- However, some analysts say that it will require significant tax hikes to fund the scheme

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Parliament tabled the National Health Insurance (NHI) Bill last week and it is now set to be discussed by the Portfolio Committee on Health.

The bill aims to provide "comprehensive healthcare services" to all South Africans.

But many commentators and members of the public have raised questions about how the services will be funded.

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According to the bill the majority of the funding will come from tax, Briefly.co.za has gathered. Some other funds will also be reallocated by Treasury from their current uses to be spent on the program.

However, the bill does not yet provide exact information about how much of this money will be raised. The original draft estimated that the NHI would cost the economy just over R250 billion a year, but the National Treasury is expected to produce more detailed estimates in the coming months.

This limited information has led some economists and other commentators to weigh in with their own predictions of what the costs may look like. 

For example, the bill says that it will get funds from general tax revenue, a payroll tax and a surcharge or personal income tax, according to Business Tech.

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Peter Attard Montalto says that taxes would need to be raised in order to fund the insurance scheme. To do this, Montalto estimates that a payroll tax of at least 2.7% would need to be implemented, as well as a 2.7% surcharge on income tax and an increase to VAT of 3.5%.

However, he suggested that such tax hikes would only cover the bare minimum for the scheme.

While more analysis still needs to be done, such tax increases - particularly to VAT - would likely have negative consequences for the economy and could add to South Africans' financial strain.

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Source: Briefly.co.za

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