News in South Africa 20th October:
1. Tax filing season starts:
The first deadline for the 2023 tax filing season is Monday (23 October), when non-provisional taxpayers must submit their annual tax returns. Taxpayers with more complicated financial affairs or different income streams have until 24 January next year.
Taxpayers who have been auto-assessed but disagree with the outcome also have until Monday to file an amended return. The South African Revenue Service (Sars) will process the return and issue a revised assessment, which may result in a reduced or increased refund or payment.
One aspect that may require additional attention relates to actual medical expenses versus those reflected on a taxpayer’s medical aid tax certificate. Deviations from the amounts paid by the medical scheme, out-of-pocket expenses covered by the taxpayer, and reimbursements through gap cover payouts must be manually corrected.
Carmen Westermeyer, tax director at Maitland & Associates, recently spoke about the obligations of taxpayers and their practitioners should the prepopulated information on the tax return not be a true reflection of what transpired during the tax year.
Qualifying expenses
Westermeyer notes that only the amounts fully covered by the taxpayer (out of their own pocket) can be claimed as a credit.
Any amount where the taxpayer has been reimbursed – either through their medical aid scheme or their gap cover policy – does not qualify as a deduction.
“I will fully acknowledge that there is a practical issue in this space,” she adds. If the taxpayer submits all the claims to their medical aid and they are all rejected, this will show up on the medical aid tax certificate.
If the gap cover policy subsequently paid the claims, the onus is on the taxpayer to change the amount on their income tax return.
The problem is that this does not always happen in practice. Some people claim the expenses from their gap cover and claim medical tax credits on those same expenses as well.
“This is why Sars gets so pedantic about the proof of medical expenses.” says Westermeyer.
Insurance vs medical aid
Many argue that paying medical gap cover insurance on top of a medical aid contribution is an additional expense.
Westermeyer says gap cover is viewed as an insurance product and not a medical aid scheme since gap cover is not governed by the Medical Schemes Act. It is not a medical aid scheme as defined in the act.
It seems to be a matter of “better the devil you know than the devil you don’t know”.
2. NHI bill needs work:
Discovery CEO Adrian Gore says the National Health Insurance (NHI) could work in South Africa if amendments are made to the current Bill.
Despite being passed by the National Assembly earlier this year, the NHI bill has received widespread criticism from private healthcare players, business leaders and parliament’s own legal service.
In its annual report, Discovery CEO Adrian Gore said that the NHI Bill in its current state is unworkable but did not dismiss the idea of universal healthcare.
“The current version of the Bill states that once NHI has been fully implemented, medical schemes may only offer complementary cover to services not reimbursable by the NHI Fund,” Gore said.
“Universal healthcare is crucial, and the NHI is a remedy to achieving this.”
“However, we are of the view that the NHI is not workable without private-sector collaboration. Funding the additional healthcare spend required for NHI through tax increases on a small base is not sustainable.”
“Treasury has not calculated how much the NHI will cost. The only number in the public domain is R200 billion, provided by the Department of Health. In reality, it is double that,” Noach said.
Using Professor Roseanne Harris’s research, Discovery Health said that the following tax increases would be needed to generate the extra R200 billion for the NHI.
- Increase VAT from 15% to 21.5%.
- Increase personal income taxes by 32%.
- Implement a payroll tax equivalent to ten times their current UIF contributions.
Although there are different combinations of VAT, personal income taxes, company taxes and payroll taxes, the total funding results are similar.
“These big tax increases will only get the government to around 50% of what the NHI requires,” said Noach.
3. SA stuck in an economic trap:
South Africa has been stuck in a low-growth trap for the last decade, with the country’s economy unable to match the growth of its population.
Wits Business School Professor Jannie Rossouw told the SABC that South Africa is stuck in this trap due to the government’s failed economic policies.
Rossouw provided an overview of the country’s census conducted last year, which showed the country’s population grew by 20% since 2011 to 62 million people.
The average annual growth rate of 1.8% over the period was the highest since the first post-apartheid-rule census was undertaken in 1996.
This is a positive development, with the data also illustrating the country’s continued attractiveness as a destination for economic migrants and political refugees, primarily from the rest of Africa.
However, Rossouw said the growth is also fraught with danger as the economy cannot support the continued population growth.
While the population is growing at an average rate of 1.8% per annum, the economy over the last decade only averaged growth of 1% per annum.
This means South Africans are getting poorer per capita every year. “I have been warning about this problem for the last five to six years,” Rossouw said.
“The country is in a low growth trap. It is obvious that it is after a decade of low to no growth. We have been in this trap since December 2013.”
“The government’s policies over the last ten years have simply not delivered the desired results.”
Rossouw said the government’s policies have failed, and the country cannot continue as it has for the past decade.
Being stuck in a low-growth trap compounds many other issues the country is dealing with, particularly the government’s deteriorating financial health.
South Africa’s budget deficit widened further in August and September compared to a year ago as government expenditure continues to grow faster than revenue.
To finance its growing budget deficit, the government has had to increase the amount of debt it issues by R2 billion to R14 billion a week.
The National Treasury said total revenue growth was 8.7% year-on-year in August, while total expenditure grew at a stronger pace of 9.2%.
The cumulative main budget deficit in the first five months of the 2023/24 fiscal year amounts to R238.4 billion, or R254.4 billion, including Eskom debt relief.
This is much higher than the deficit of R160.7 billion in the same period in 2022/23.
The only sustainable solution to this problem is economic growth, with Rossouw calling on the government to give the private sector the freedom to start and grow businesses in the country.
4. Govt owes JHB Water R636m in unpaid bills:
According to a report tabled at the city council, government departments and state-owned enterprises (SOEs) owed Johannesburg Water R636-million by the end of 2022.
The figure is likely to go up in 2023 as the city struggles with lower revenues.
Charts shows that the Gauteng Department of Health owes the most, at R340-million, followed by the departments of housing and education. The passenger rail agency, Prasa, owed Johannesburg R72-million at the end of 2022, while Transnet owed R66-million.
The debts matter because Johannesburg Water, a utility run on private sector principles, has a R20-billion infrastructure backlog and is battling a series of water crises.
As of 13 October 2023, at least 18 reservoirs were at critical levels, while 40 reservoirs were being “throttled” between 9pm and 4am to restore water levels. This leaves many areas short of water at night.
“The reason it [the debt] matters is that Joburg Water is suffering from very limited funds. Pipe replacements must be done. Joburg Water is only replacing 12km to 15km a year; the minimum should be 100km a year,” says Nicole van Dyk, the DA spokesperson for infrastructure in the city.
“The utility is also struggling immensely for parts, vehicles and contractors. Leaks often continue for days.”
Gauteng Premier Panyaza Lesufi acknowledged the debt.
“The Gauteng provincial government has been pushing its departments and entities to honour their debt commitments. It’s unsustainable for one arm of government to owe another and be forced to resolve issues through the courts,” said Lesufi through his spokesperson, Sizwe Pamla.
“We need to establish a debt management agency with the Department of Cogta [Cooperative Governance and Traditional Affairs] so we can manage this debt,” said Lesufi.
5. Transnet asks state for help:
Transnet has asked that the government take on a portion of its historical debt, similar to the R245 billion debt relief offered to ailing power utility Eskom, as the state logistics company continues to struggle under a R130 billion debt pile and other operational and financial challenges.
All information sourced from articles posted by: Moneyweb, BusinessTech, DailyInvestor, DailyMaverick, and BusinessDay.
