South Africa

1,000% payroll tax increase needed to fund NHI

South Africa’s largest medical aid provider, Discovery, has warned against implementing the National Health Insurance (NHI) Bill in its current form. However, it still supports universal healthcare. 

Discovery used its presentation of the company’s interim results to outline its argument against implementing the NHI Bill as promulgated by the government. 

The NHI Bill is currently on President Ramaphosa’s desk, waiting to be signed into law. This will set the wheel in motion regarding its implementation, which is set to take around a decade. 

The bill is moving forward despite strong criticism from businesses, including Discovery, and civil society groups. They argue the current form of the NHI was pushed through Parliament without sufficient public input. 

Discovery Group CEO Adrian Gore has previously labelled the NHI irrational in its current form and risks destabilising the tax base. 

Gore said the proposal doesn’t sufficiently tackle the core issue of funding being too little for it to be viable. 

“The tragedy of our country is a narrow tax base with high levels of unemployment. You don’t have sufficient money to buy comprehensive benefits for all South Africans,” Gore said.

“It just doesn’t seem plausible. You could seriously destabilise the taxpayers that actually are funding the NHI.”

Discovery reiterated its warnings in the presentation for their interim results on Wednesday. It urged the government to work with the private sector to make universal healthcare work in South Africa. 

The company laid out the tax increases that would be needed to fund the NHI, which would require around R200 billion in additional funding each year –

  • A 31% increase in personal income tax or
  • A 6.5% increase in VAT or
  • A ten times increase in payroll tax

This is simply unsustainable for a country with an extremely small tax base, which is already being squeezed to raise revenue for the government. 

“If you were to do that, I would argue that you would destroy the economy,” Gore has previously said.

“It’s not a healthcare issue – it creates a real economic problem. I don’t think people would bear paying 30% more taxes and having 70% less healthcare.”

He said the NHI, in the form described in the NHI Bill, is not something the country can currently afford.

“If we get rapid economic growth and, over time, we find ways to do this in different ways with many different methodologies, then it may be workable,” he said.

Gore said the only way to achieve a workable NHI in South Africa is to keep the private sector in place.

Discovery said the government has to work with the private sector if it wants universal healthcare in South Africa, and thus, it must change Section 33 of the NHI Bill.