Wamuzi News Ke
In a landmark ruling today, the High Court has invalidated the 2.75 percent deduction made by government to the Social Health Insurance Fund (SHIF) from gross salaries—holding that it amounts to illegal double taxation.
Presiding over the case, Justice Chacha Mwita delivered a scathing judgment, stating that any deduction taken from gross income beyond the legislated income tax contravenes the Constitution. He described the practice as an “unlawful and harmful component” that violates Article 223 of the Income Tax Act and effectively double-levies workers on the same pay.
“Any statutory deduction based on gross income after income tax… constitutes double taxation,” Justice Mwita ruled, striking down the regulation outright .
The lawsuit was filed by four medical doctors, who also raised concerns over the forced transfer of their personal data from NHIF to SHIF and the involvement of a third party tied to the Adani-linked consortium behind Universal Health Coverage (UHC) infrastructure. Though the main focus of the lawsuit targeted taxation, the judgment acknowledged broader constitutional risks involving data privacy and NHIF-to-SHIF migration.
What This Means for Salaried Kenyans
The ruling, though definitive, stopped short of issuing immediate refunds. Justice Mwita cited a related appeal pending at the Court of Appeal and struck out the petition, indicating that final determination awaits further judicial review.
Nonetheless, this judgment challenges the legal basis of SHIF deductions and puts pressure on both Parliament and the government to promptly address the shortfall. Without swift legal or legislative action, the integrity of UHC financing may now hang in the balance.
Reaction and Next Steps
The four doctors, who campaigned fiercely against what they termed “punitive contributions from already taxed income,” argue their case strikes at fairness and consumer protection. Many employees have borne the full 2.75 percent deduction, regardless of post-tax income—a pattern the court highlighted as inequitable.
The government must now reassess the structure of SHIF contributions and consider legislative amendments to ensure compliance with constitutional tax norms. At the same time, the handling of leaked staff data between NHIF and SHIF will likely return for judicial scrutiny.
Why This Matter Urgently
- Legal precedent: The ruling establishes that deductions from gross income—already subject to PAYE—are unconstitutional unless explicitly legislated.
- Fiscal shock: With millions of workers already charged SHIF fees, the decision threatens government health funding and could spur a rush for refunds.
- Policy crossroads: A similar SHIF challenge is ongoing in the Court of Appeal, and this ruling could tip the balance, compelling Parliament to act or risk legal rebuke.
As Kenya embarks on implementing Universal Health Coverage, today’s decision sends a clear signal: financing must be grounded in law—not expedient policy. With worker rights upheld and government coffers on alert, UHC ambitions are facing their most immediate constitutional test yet.
