Budget speech commentary - 2011: Aon South Africa

The Minister of Finance, Pravin Gordhan, today presented the budget speech to parliament emphasizing that it is now time for all South Africans to have a say in budgetary matters.

This principle proposed by the Minister of Finance challenges us to ensure that we all participate actively in the economy, in order to achieve the objectives set for all South Africans.

In finding a solution where all citizens have access to equitable quality and universal healthcare, the Minister of Finance announced the following:

• Improved infrastructure;

• Introduction of family healthcare and family healthcare teams.

• The delivery of primary healthcare through family health teams draws on lessons from the successful adoption of this approach in Brazil;

• Improve quality in health facilities, medical equipment and hospital systems;

• Improved district based maternal and child health services;

• Establishment of the office of Standards Compliance to inspect and to certify hospitals;

• Expanding the capacity to train medical doctors and nurses;

• Expanding the number of people on treatment for HIV/Aids from 1,2 million in 2011/2012 to 2,6million for 2014/2014.

Funding of the proposed Universal healthcare to all South African citizens (NHI) can include the following:

• A payroll tax and/or;

• An increase in the VAT rate and/or;

• Surcharge on individuals’ taxable income.

The Minister of Finance indicated that the fiscal and financial implications of the health system reform will be examined in the year ahead. We can expect an inclusive consultative process.

The monthly tax deductible threshold towards medical scheme contributions will be replaced by a tax credit with effect from March 2012.The tax credit is more equitable since it provides for an equal benefit to all tax payers regardless of their income. This change will only be applicable from March 2012. A discussion document on the proposed tax credits will be issued by the end of March 2011.

The changes to the monthly deductible threshold of medical scheme contributions are as follows:

• Taxpayers of 65 years and older may claim all qualifying expenditure - this remains the same as during 2010;

• Taxpayers younger than 65 years may claim all qualifying medical expenses where the taxpayer or taxpayer’s spouse or child is a person with a disability - this remains the same as during 2010;

• Other taxpayers under 65 years may deduct monthly contributions to medical schemes from R620 to R720 for each of the first two dependants on their medical scheme and from R410 to R440 for each additional dependant.In addition, they can claim a deduction for medical scheme contributions above the caps and any other medical expenses limited to the amount which exceeds 7,5% of taxable income (excluding retirement fund lump sums).