Taxpayers received clear confirmation from Finance Minister Enoch Godongwana that he has made no decision or pronouncements on the scrapping of medical tax credits to pave the way for a national health insurance (NHI) programme.
Godongwana says the people who are currently receiving medical tax credits are the bulk of the people contributing to personal income tax. Removing the tax credit will effectively be an attack on the middle class who shoulder most of the personal income tax base.
Godongwana responded to questions during a media briefing in parliament, ahead of his tabling of the 2025 Medium-term Budget Policy Statement (MTBPS).
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The Department of Health and particularly Minister of Health Aaron Motsoaledi have been vocal about the phasing out of the medical tax credits, saying that once the NHI is operational, the credits will serve no purpose.
Godongwana says he has made no statement about the scrapping of the medical tax credits as there is no alternative in place to fund an NHI. National Treasury has been meeting with the Department of Health on this issue.
“We are doing some work internally and between the government departments to look at particular options, but no decisions have been made as yet,” a National Treasury official said.
When asked if there will be an announcement in the 2026 Budget, he said even that will be too much to answer.
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Context
The medical tax credits were introduced around 2012.
In a Moneyweb interview, Board of Healthcare Funders MD Dr Katlego Mothudi said that, prior to this, taxpayers could indicate what their medical deductions were on their tax returns, but the system was regarded as “regressive”, in that the people who spent more money on the higher options would get higher rebates.
A more progressive system was introduced through the medical tax credits, where a flat rate was introduced.
Taxpayers receive a credit of R364 each for the main member and the first dependant. And then for every subsequent dependent there is an additional credit.
“From what we gather, if this system is going to be reversed, it would actually hit members on the lower plans or the lower-earning members more than those who are high earners,” Mothudi said.
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He referred to a recent calculation that showed of the R34 billion that is currently being given back to scheme membership, only about R2 billion is given back to people earning above R1 million.
“That immediately shows you that the hardest-hit people will be those who have lower earnings.”
This rings true to the statement by Godongwana that removing the tax credit will in fact be an attack on the middle class.
This article was republished from Moneyweb. Read the original here.
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