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Private: Medical aid tax credits to be phased out within the coming months

Taxpayer’s tax credits will likely be phased out within the coming months as a means of funding the incoming National Health Insurance scheme.

This is according to Dr Mark Blecher, chief director for Health and Social Development at the National Treasury, who was addressing a GEMS symposium on Friday reports. Die Burger.

According to Blecher, announcements about the phasing out of the credits are expected to be made by finance minister Malusi Gigaba during the mid-term budget on 25 October, and in the main budget speech next year.

Blecher warned that lower and middle-class earners should prepare themselves for the loss of these credits – as these are the groups that will be hit the hardest.

“It is very important that people whose tax will be amended understand the benefits they receive due to these credits, and what they will be giving up to the NHI,” he said.

Government is expected to collect close to R25 billion from these tax credits, which will be used to help fund South Africa’s poorest citizens under phase 2 of the incoming NHI.

Health minister Aaron Motsoaledi had previously indicated that the priority programmes that would initially be covered by the NHI Fund include healthcare at schools, childhood cancer, women’s health (including pregnancy, cervical cancer and breast cancer), mental health services, disability and rehabilitation services, and hip, knee and cataract surgery for the elderly.

The total cost of these implementations is expected to reach R69 billion over the next four years.

In a statement sent to BusinessTech on Tuesday (17 October 2017), Treasury said:

Die Burger and BusinessTech reported over the past few days that tax rebates on medical expenses would be removed over the next few months. This was an incorrect understanding of what was stated at the GEMS Conference. The policy position has not changed since the announcements that were made in the NHI White Paper and in the 2017 Budget Speech.

These documents stated that:

As the NHI evolves, the tax treatment of medical expenses and medical scheme contributions will be reviewed”, and “(i)t should be noted though that consideration is being given to possible reductions in this subsidy in future, as part of the financing framework for National Health Insurance”.

Tax proposals are announced by the Minister of Finance at the time of the Budget Speech in February each year, and no further proposals relating to the medical tax credit have been announced. The reference to “phasing” was in relation to the idea that the National Health Insurance is being implemented gradually, and not as a big bang reform, which will most likely require a similarly phased approach from a tax perspective to raise additional funding.