High Court Declares SHIF Deductions Illegal
This ruling comes close to a month after the World Bank urged the Kenyan government to scrap the mandatory Social Health Insurance Fund (SHIF) contributions for low-income earners in the formal sector
Marvin Chege 
The High Court has ruled that the 2.75 percent deduction from gross income for the Social Health Insurance Fund (SHIF) is illegal.
Justice Chacha Mwita, who delivered the judgment on Monday, June 23, stated that the mandatory SHIF contribution amounts to double taxation and is therefore inconsistent with existing income tax laws.
He explained that deducting the SHIF levy directly from gross income—before calculating and applying income tax—places an unfair financial burden on workers, effectively taxing the same income twice.
Justice Mwita further emphasized that such deductions undermine constitutional principles of fairness and legality in taxation.
The Milimani Law Courts in Nairobi. /FILE
As a result, the court found the move not only illegal but also unconstitutional, marking a significant setback for the government’s rollout of the new health insurance scheme.
“There can be no other gross income from which the person can again contribute 2.75 per cent to the Fund under SHIA and the regulations made thereunder. Any subsequent or other statutory eduction(s) based on the person’s gross income after income tax, is undoubtedly double taxation, charge or levy because the same gross income will have been taxed more than once under the Income Tax Act and the regulations made under SHIA as contribution to the Fund,” ruled Justice Mwita.
“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."
However, the judge refused to grant any orders, noting that a related case is already pending before the Court of Appeal.
The case was brought before the court by four medical doctors, who argued that Kenyans are receiving substandard healthcare coverage from the government, despite paying hefty premiums for private insurance.
They also challenged the transfer of their personal data from the National Health Insurance Fund (NHIF) to the newly established Social Health Authority (SHA), raising serious concerns about data privacy and security.
Dr. Clarence Eboso, Dr. Darwin Abuka, Dr. Cherono Siele, and Dr. Bosibori Ondari claimed there was no assurance that their information would be safeguarded and stated they never gave consent to be enrolled in the new health scheme.
Additionally, they raised alarm over the involvement of Apeiro Limited—allegedly linked to the Adani Group—in the management of the Universal Health Coverage (UHC) system. The doctors argued that this connection poses a major risk to data integrity, pointing out that India, where the Adani Group is based, has a reputation for cyber vulnerabilities and weak data protection standards.
Apeiro is the majority stakeholder in a consortium that secured a Ksh 104 billion contract to deliver an Integrated Healthcare Technology System (IHTS) for the Universal Health Coverage (UHC) initiative.
“The fact that the Ministry single-sourced a consortium of Health Information System providers to handle health data under the Social Health Authority, one partner of whom is originally registered in a jurisdiction with a poor data privacy record, creates a real concern that safety of our personal data is not guaranteed,” the medics claimed.
The doctors criticized the Kenya Kwanza government’s health scheme, describing it as both costly and substandard. They argued that while Kenyans will be required to pay more, the benefits and coverage provided under the new system will be significantly less.
This ruling comes close to a month after the World Bank urged the Kenyan government to scrap the mandatory Social Health Insurance Fund (SHIF) contributions for low-income earners in the formal sector, with critics warning that the current payroll-based model is a barrier to advancing Universal Health Coverage (UHC).
The international financial institution cautioned that this approach discourages the shift to formal employment and could deepen inequalities in healthcare access, especially in a country where almost 80 per cent of the workforce operates within the informal sector.
President William Ruto speaking during a past event and NHIF's logo before it was rebranded to SHA (inset). /PCS.NHIF
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