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November 2017 Newsletter

NHI could mean uncomfortable trade-offs, Davis Tax Committee warns

The government's current proposals for Naonal Health Insurance (NHI) are unlikely to be sustainable unless there is sustained economic growth, and may require trade-offs with other ambions, the Davis Tax Commi(ee has warned.

The commi(ee, headed by Judge Denis Davis, released six reports on various aspects of tax administraon.

"The magnitudes of the proposed NHI fiscal requirement are so large that they might require trade-offs with other laudable NDP (Naonal Development Plan) programmes such as expansion of access to post-school educaon or social security reform," said the report dealing with NHI.

The report is based on an analysis of the first NHI White Paper, published for comment in December 2015, as it was signed off several months before health minister Aaron Motsoaledi released a revised White Paper in June. However, the two White Papers have virtually idencal financing proposals.

The Davis commi(ee expressed concern about the degree of uncertainty surrounding how the NHI will be implemented and operated, saying more details were needed to understand its resource requirements. It consequently stopped short of making firm recommendaons about how to finance NHI, saying to do so would be premature.

However, it said substanal increases in VAT or personal income tax, possibly along with a new social security tax, would be required to fund NHI.

Revenue raised to fund NHI should not be earmarked, as that risked under-funding, it said. The commi(ee sounded a note of cauon over the revenue shor6alls projected in the White Paper, which it said were extremely sensive to assumpons about economic growth and could substanally underesmate the funding gap for NHI if the economy faltered.

The 2011 White Paper esmated the revenue shor6all would be R71.9bn in 2010 prices by 2025-26 if the economy grew at 3.5%, and R108bn if economic growth slowed to 2%.

Last modified on Monday, 16 January 2017 06:29


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