The Value-Added Tax treatment of the supply of medical services provided under the (proposed) National Health Insurance Fund

Abstract

The government of South Africa is preparing for the enactment of the National Health Insurance Bill (“NHI Bill”) as well as the establishment of the National Health Insurance Fund (“NHI Fund”). The enactment of the NHI Bill will have significant impact on the present financing of healthcare system in South Africa. The objective of this work is to consider the tax consequences when the NHI Fund purchases medical services. This is because the NHI Fund will source funds and use same to purchase medical services from suppliers on behalf of the users. As a result, a clear distinction and analysis is made between VAT registered private medical suppliers and VAT exempt public medical suppliers. This study also considers existing public insurance schemes like RAF to determine the tax approach that has been adopted for these insurance schemes. Therefore, the Value-Added Tax Act 89 of 1991 (“VAT Act”) in general and the charging provisions in particular are central to the discussions herein. A comparative study between the South African NHI regime and the UK’s NHS regime is also made in line with the title of this study. As a result, this study is able to highlight the potential revenue leakages under the NHI regime and the need to ensure that revenue is recycled to sustain the NHI regime.