A major government policy on healthcare financing has hit a legal snag after the High Court declared mandatory SHIF deductions from salaried workers’ gross pay to be unconstitutional.
In a strongly worded ruling, Justice Chacha Mwita criticized the 2.75% levy on gross income under the Social Health Insurance Fund (SHIF), calling it an act of double taxation that contradicts established tax laws. The judge maintained that once income tax is deducted from gross pay, no further levies can be legally imposed on the same amount.
“The law only permits withholding income tax from gross earnings. Any additional statutory deduction on gross income, such as the 2.75% SHIF contribution, amounts to taxing the same income twice,” Justice Mwita explained in his judgment.
He went on to state that such an approach not only defies legal principles but also places an unjust financial burden on employees who are already compliant with income tax obligations.
“There can be no second gross income,” the judge emphasized, “and any regulation that demands contributions from already taxed income introduces a negative and unlawful taxation component.”
Despite the clarity of his findings, Justice Mwita opted not to issue a formal order suspending the regulations, citing a related matter currently pending before the Court of Appeal. His caution, he explained, was to avoid conflicting rulings from different courts.
The legal challenge had been brought forward by four medical doctors who questioned the constitutionality and fairness of the deductions. Their case has now spotlighted significant flaws in the implementation of the SHIF policy, raising questions about how the government will proceed without running afoul of constitutional tax guidelines.
As the matter awaits a final verdict at the appellate level, the judgment casts doubt on the current structure of health insurance contributions and potentially opens the door to broader scrutiny of how statutory deductions are imposed on Kenyan workers.
