The High Court has singled out a problem and a grave government blunder regarding the Social Health Insurance Fund (SHIF) contribution by the salaried workers.
In his judgment, Justice Chacha Mwita said that the 2.75 per cent deduction from gross income is double taxation and, therefore, illegal.
According to the Judge, the law clearly states that only income tax is withheld from gross income; therefore, no other deductions can be made from an employee’s total earnings.
He asserted that any further deductions, after the payment of income tax, introduce an unlawful and harmful component that constitutes double taxation.
“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,” said Justice Mwita.
The judge, however, declined to issue any order after finding there was a separate case before the Court of Appeal.
“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,” he said.
The case was filed by four medical doctors.
By Kamau Muthoni
