The High Court has declared the mandatory 2.75 per cent deduction from gross income for the Social Health Insurance Fund (SHIF) illegal, dealing a significant blow to the government’s efforts to finance Universal Health Coverage (UHC).
In a ruling delivered on Monday, Justice Chacha Mwita found that the levy amounts to double taxation, stating that it imposes an additional charge on income that has already been taxed under the Income Tax Act.
“The law is clear that gross income is chargeable to income tax. Subjecting it to any other statutory deduction, particularly of a similar nature, is unlawful,” said Justice Mwita in his judgement.
The decision throws into question the future of SHIF, the government’s flagship health financing scheme intended to replace the National Hospital Insurance Fund (NHIF) and broaden access to healthcare. It also raises concerns over how the state will fund the ambitious UHC agenda in the wake of the ruling.
The case was filed by four medical doctors who challenged not only the legality of the deductions but also the manner in which personal data was being handled during the transition from NHIF to SHIF.
They argued that individuals were not given an opportunity to consent to the transfer of their information between the systems.
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