Health Cabinet Secretary Aden Duale has defended the 2.75% deductions under the Social Health Insurance Fund (SHIF), clarifying that they are legally grounded in a law signed by President William Ruto in December 2024.
In a statement on Monday, June 23, the Health CS stated that the legal foundation for the deductions is the Tax Laws (Amendment) Act, 2024.
He explained that the Act formally classified the SHIF contribution as tax-deductible, cementing its position in Kenya’s health financing system.
Therefore, the CS stated that SHIF deductions remain legally in effect and are central to the government’s Universal Health Coverage (UHC) plan.
Also Read: High Court Judge Says SHIF Deductions Are Illegal
“The 2.75% contribution remains legally in force and is now recognized as tax-deductible under the Tax Laws (Amendment) Act. 2024,” stated Duale.
SHA, the successor of NHIF, operates under a new legal framework which includes the Social Health Insurance Act, the Digital Health Act, and the Primary Health Care Act.
“SHA continues to operate within the legal framework provided by the Universal Health Coverage laws, the Social Health Insurance Act, the Digital Health Act, and the Primary Health Care Act,
“All of which are designed to uphold equity, financial protection, and access to quality health services for all Kenyans,” he added.
Duale Responds to High Court Judge on legality of SHIF Deductions
Duale’s statement comes in response to a recent High Court judgment by Justice Chacha Mwita, which described the deductions as unlawful and a form of double taxation.
In his ruling on Petition E524 of 2024, the judge held that deducting 2.75% from a person’s gross income, after income tax has already been applied, contravenes established tax principles and violates the law.
“By providing that a person contributes 2.75% of his/her gross income to the Fund after paying income tax from the same gross income, the regulation introduces a negative element of taxation, which is double taxation and would, as a result, make such a regulation unlawful,” said Justice Mwita.
Also Read: KRA Clarifies Insurance Relief on SHIF Contributions
He explained that gross income should only be subjected to income tax under the Income Tax Act, and that any additional deduction, such as SHIF, from the same income amounts to taxing workers twice.
The petition, filed by four medical doctors, also challenged the transition of data from the now-defunct National Health Insurance Fund (NHIF) to the Social Health Authority (SHA).
The petitioners argued that deductions from already-taxed income infringed on the constitutional right to private property.
However, Justice Mwita noted that a related Petition E513 of 2024 is already active in the Court of Appeal. As a result, the High Court struck out the petition without issuing any formal orders.
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