NAIROBI, Kenya — Kenya’s High Court has expressed significant reservations regarding the legality of the mandatory monthly deductions from salaried citizens for the Social Health Insurance Fund (SHIF), suggesting they could be unconstitutional.
On Monday, Justice Chacha Mwita observed that the 2.75 per cent contribution to the Fund is problematic, explicitly categorizing it as double taxation. He reasoned that every citizen is already obligated to pay income tax under the Income Tax Act – a tax directly levied on one’s gross income, whether derived from employment or investment.
Justice Mwita underscored that imposing an additional deduction on the same gross income after income tax has been paid, and any other statutory deductions based on that already-taxed gross income, would amount to double taxation.
In the judge’s view, the SHIF regulations introduce a “negative element of taxation” – rendering the contribution unlawful and an undue burden contrary to the principles of fair taxation.
The court delivered this decision in response to a case initiated by three medical practitioners. However, the High Court ultimately struck out the petition, concluding that it would be premature to rule on the matter while a similar case remains pending before another court.
The ruling highlighted that the issues presented in the petition closely mirrored those in Petition E513 of 2024, which challenges the legality of SHIF regulations and the constitutionality of several health laws, including the Social Health Insurance Act, 2023, the Digital Health Care Act, 2023, and the Primary Health Care Act, 2023.
The court also addressed the automatic transfer of personal data from the now-defunct National Health Insurance Fund (NHIF) to SHIF, a move contested by the petitioners.
The judgment determined that the petitioners had not adequately demonstrated how the data transfer violated either the Constitution or the parent Act. It further noted that Regulation 5 of the Social Health Insurance (Amendment) Regulations, 2024, supports the transfer, permitting member data from NHIF to be moved to SHIF utilizing existing government databases.
Also Read: SHA recruiting for 8 senior positions – Find out how to apply
While the petitioners dismissed this amendment as an “afterthought,” the court maintained that no legal grounds had been presented to dispute its constitutionality. In conclusion, the judge ruled that entertaining the petition would be improper given that related issues are still awaiting determination before the Court of Appeal and in Petition E513 of 2024.
“For the above reasons, this petition is struck out,” the court ruled.
In their arguments, the petitioners contended that the 2.75% contribution from one’s gross income would lead to higher-income earners contributing more than lower earners for the same benefits, deeming this arrangement discriminatory.
It is noteworthy that in 2023, when the new healthcare program was initially introduced, the High Court had declared it unconstitutional, citing a lack of public participation.
A three-judge bench, comprising Justices Alfred Mabeya, Robert Limo, and Fridah Mugambi, had also previously ruled that the new Social Health Insurance Act created disparities that would unduly burden salaried individuals through its contribution structure.
Despite these ongoing legal challenges and judicial concerns, salaried Kenyans and their employers have continued to make contributions to the fund.
