HIgh Court declares SHIF deductions illegal, says they amount to double taxation
Justice Mwita says an employee's gross income should only be subjected to income tax, as clearly defined by law, with no additional deductions thereafter
The government push to roll out universal healthcare through the Social Health Insurance Fund (SHIF) has suffered a blow after the High Court declared the 2.75 per cent deduction from salaried employees illegal.
Making the determination, Justice Chacha Mwita said the mandatory deduction amounts to double taxation as the employees also pay income tax.
“I must point out here that the mandatory 2.75% contribution to the Fund is indeed problematic. Every citizen is required to pay income tax under the Income Tax Act, being a percentage of the person’s gross income. Income refers to money a person earns for doing work, or money received from one’s investments. Income tax is paid from the person’s gross income, and after paying income tax from that gross income, what remains is net,” he said.
“In that regard, by providing that a person contributes 2.75% of his/her gross income to the Fund after paying income tax from the same gross income. The regulation introduces a negative element of taxation, which is double taxation and would, as a result, make such a regulation unlawful,” Justice Mwita added.
The judge however, did not pronounce himself on the fate of SHIF, which is run by the Social Health Authority (SHA), the successor of the National Hospital Insurance Fund (NHIF), noting that there is a pending appeal on the same filed last year.
“A perusal of the pleadings and prayers in this petition as well as the pleadings and prayers in petition E513 of 2024, shows that the issues raised in the two petitions are crosscutting. It is the view of this court that the appropriate course to take is to decline this petition so that the issues pending in the civil appeal and petition E513 of 2024 can be resolved. Consequently, and for the above reasons, this petition is struck out,” he said.
Four medical doctors had moved to court to challenge the legality of SHIF seeking a declaration that “the income of any person after payment of income tax under the Income Tax Act is absolutely the person’s private property and is protected under the constitutional right to property.”
President William Ruto has been pushing to have all Kenyans register with SHIF, which has since been rebranded as Taifa Care, saying it has a comprehensive benefits package that is easily accessible unlike NHIF, which mainly served salaried Kenyans.
