RESYST Working Paper 6: Increasing tax revenue and its impact on financing public health care in South Africa
With the growing emphasis on moving towards universal health systems, there is debate about how to expand pre-payment funding mechanisms for health care. Surprisingly, there has been little advocacy about the potential for increasing public financing of health care through improved tax collection and larger total government budgets.
South Africa has been strikingly successful in strengthening its tax collection capacity over the past two decades: total government revenue more than doubled in real terms between 1994/95 and 2010/11. This study looks at how the post-apartheid South African tax collection agency managed to increase tax revenue, and whether the increase in general tax revenue impacted on government funding for the health sector.
It finds that the percentage of the budget allocated to health fell between 1996 and 2004, and a decade later, it remains below the 15% target set by the Organisation for African Unity’s 2001 Abuja declaration. This is partly due to the misperception that health is an unproductive sector with few economic benefits. A critical challenge for Ministries of Health is to find ways to make a better case for health during budget negotiations so as to expand the share of government spending on health.