High Court judge Chacha Mwita says 2.75pc SHIF deductions unlawful

The High Court has raised serious concerns over the legality of the mandatory monthly deductions on salaried Kenyans to the Social Health Insurance Fund (SHIF), terming it potentially unconstitutional.

Justice Chacha Mwita on Monday observed that the 2.75 percent contribution to the Fund is problematic, terming it as double taxation.

He argued that every citizen is already obligated to pay income tax under the Income Tax Act — a tax levied directly on one’s gross income, whether earned from employment or investment.

Justice Mwita emphasized that it is unlawful to impose an additional deduction on the same gross income, even after income tax has been paid and any other statutory deductions based on the already-taxed gross income would amount to double taxation.

In the judge’s view, the SHIF regulations introduce a "negative element of taxation" — making the contribution unlawful and a burden contrary to principles of fair taxation.

The court was issuing its decision in a case filed by three doctors.

However, the High Court struck out the petition, ruling that it would be premature to determine the case while a similar matter is still pending before another court.

It ruled that issues raised in the petition closely mirrored those in Petition E513 of 2024, which questions the legality of SHIF regulations, as well as 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 found that the petitioners had not sufficiently demonstrated how the data transfer violated the Constitution or the parent Act.

It further noted that the transfer is supported by Regulation 5 of the Social Health Insurance (Amendment) Regulations, 2024, which allows member data from NHIF to be moved to SHIF using existing government databases.

While the petitioners dismissed the amendment as an “afterthought,” the court held that no legal basis had been provided to challenge its constitutionality.

In conclusion, the judge ruled that it would be improper to entertain the petition while related issues are still pending before the Court of Appeal and in Petition E513 of 2024.

“For the above reasons, this petition is struck out,” the court ruled.

In the matter, petitioners argued that the 2.75% contribution from one’s gross income would see higher income earners contributing more than lower earners, yet they would enjoy the same benefits would be the same, terming is discriminatory.

In 2023, when the new healthcare progamme was rolled out, the High Court declared it unconstitutional, arguing that ruled that there was no public participation.

A three-judge bench constituting Justices Alfred Mabeya, Robert Limo, and Fridah Mugambi further ruled that there were disparities in the new Social Health Insurance Act since it would burden a few salaried individuals by creating a disparity in the contributions.

Salaried Kenyans and employers have however been contributing to the fund.