SHA Deduction Model Declared Illegal By The High Court

The High Court of Kenya has declared the mandatory 2.75 percent deduction from workers’ gross monthly income to fund the Social Health Authority (SHA) unconstitutional and illegal.

Justice Lawrence Mugambi Mwita, who delivered the judgment, stated that the deductions amount to double taxation and infringe on the existing income tax laws.

According to the proposed regulation, all Kenyan households—both employed and unemployed—were expected to contribute 2.75% of their gross income to support the Universal Health Coverage (UHC) programme through the SHA.

However, the High Court found this provision problematic, emphasizing that the deduction placed an extra burden on taxpayers without offering corresponding relief in their tax obligations. Justice Mwita noted that this kind of parallel taxation creates a negative taxation effect, ultimately resulting in double taxation—a position echoed in prior legal challenges.

The ruling now puts into question the future of SHA funding and the government’s approach to financing the universal healthcare plan. It also opens the door for legal challenges from workers and employers who have already been subjected to the deductions. Stakeholders are awaiting further directions from the Ministry of Health and the National Treasury on the way forward.

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