NATIONAL NEWS - As government mulls its options to reduce expenditure while funding priority programmes, experts have warned that the abolishment of the medical tax credit could be highly problematic and may even face legal challenge in the absence of alternative solutions.
Medical scheme members currently receive a medical tax credit of R303 per month for the first two beneficiaries and R204 per month for the remaining medical scheme members.
In contrast to a tax deduction, which lowers a taxpayer’s taxable income, a tax credit reduces an individual’s tax liability.
The medical tax credit allows all taxpayers the same benefit in rand, regardless of their income level.
According to National Treasury, three million taxpayers claimed the credit on behalf of eight million medical scheme members in 2014/15, which required tax expenditure of R18.5 billion.
Government is under significant pressure to find additional revenue sources and cut spending in order to stabilise its fiscal position, overcome a massive tax revenue shortfall and fund policy priorities.