The High Court has dominated that the deduction of two.75% from the gross salaries of Kenyan staff below the Social Health Insurance Fund (SHIF) is against the law and a double taxation.
In a judgment delivered by Justice Chacha Mwita, the courtroom dominated that deducting SHIF contributions from an worker’s gross revenue, after revenue tax has already been utilized, is a violation of tax legislation.
Further, the decide famous that gross revenue ought to solely be subjected to revenue tax, as clearly outlined by legislation, and no extra deductions needs to be produced from it thereafter.
Additionally, he famous that some other tax deducted is double taxation, a cost or a levy.
“There might be no different gross revenue from which the particular person can once more contribute 2.75 per cent to the Fund below SHIA and the rules made thereunder.
“Any subsequent or different statutory eduction(s) based mostly on the particular person’s gross revenue after revenue tax, is undoubtedly double taxation, cost or levy as a result of the identical gross revenue can have been taxed greater than as soon as below the Income Tax Act and the rules made below SHIA as contribution to the Fund,” dominated Justice Mwita.
High Court on the Way Forward
The decide defined that taxing the identical revenue twice, first by means of revenue tax and once more by means of SHIF contributions, provides an illegal monetary burden on staff and contravenes established tax rules.
However, Justice Mwita didn’t difficulty any formal orders on the matter, citing an ongoing attraction case bearing on the identical difficulty on the Court of Appeal.
The petition difficult the deductions was filed by 4 medical medical doctors, addressing rising considerations amongst salaried professionals over the implementation of the Social Health Insurance Act (SHIA).
The SHIF deductions took impact in July 2024, implementing a 2.75% deduction of gross month-to-month revenue for salaried staff.
The transfer changed the earlier National Health and Insurance Fund (NHIF) system the place Kenyans made contributions based mostly on wage brackets.
World Bank Warning on SHIF
A World Bank’s Public Finance Review Report (PFRR) launched on Tuesday, May 27, referred to as on Kenya to rethink its strategy to financing Universal Health Coverage (UHC), particularly the obligatory contributions to the Social Health Insurance Fund (SHIF) for sure classes of staff.
The financial institution highlighted rising considerations concerning the long-term viability of Kenya’s present UHC funding technique.
In addition, the World Bank identified that Kenya’s largely casual financial system presents a significant problem to counting on contribution-based mechanisms like SHIF.
With most staff working exterior formal employment buildings, constant collections stay troublesome.
According to the report, SHIF is projected to boost simply Ksh67 billion yearly, far wanting the KSh157 billion wanted to completely help the nation’s UHC targets.
