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National Health Act, 2003 (Act No. 61 of 2003)


National Health Insurance Policy towards Universal Health Coverage

Chapter 7 : Financing of NHI

7.5 Options for public funding of NHI

7.5.3 Value-Added Tax


231. From a tax efficiency perspective, there are several arguments for favouring an increase in value-added tax. The present value-added tax rate of 14 per cent is moderate by comparison with the international average (16.4 per cent) and its base is broad, reaching both the formal and informal economies. Value-added tax is robust (buoyant) in that it generates a substantial and stable share of national income in tax revenue. Consumption taxes are generally considered less distortionary in their impact on the productive allocation of resources, they do not impact negatively on formal sector employment and they do not discourage savings, which is important for economic growth.


232. However, from an equity perspective, there is concern that value-added tax is regressive. To some extent this is offset by zero-rating basic necessities, though this relief probably benefits middle and higher income earners more than the poor (because of their higher absolute levels of spending), and some of the benefit goes to suppliers rather than benefiting consumers through lower prices.