Kenya: Setback for Ruto as High Court Declares 2.75% SHIF Deductions Unconstitutional

By Samuel Ouma

President William Ruto’s flagship Universal Health Coverage (UHC) agenda has suffered a major setback after the High Court declared the mandatory 2.75% deductions from gross income for the Social Health Insurance Fund (SHIF) illegal and unconstitutional.

Delivering the ruling, Justice Chacha Mwita stated that the deductions amounted to double taxation, as they targeted gross income that had already been taxed under the Income Tax Act.

The judge said that gross earnings should only be subjected to income tax and that any additional statutory deductions based on the same amount were in violation of the law.

“The law is clear—income tax applies to gross income. Any further levy imposed on that same income, without due legal backing, is unconstitutional,” ruled Justice Mwita.

The landmark judgment was issued in a case filed by four medical doctors who challenged the legality of the SHIF framework. Beyond the taxation concerns, the petitioners also raised issues over data privacy, arguing that the transition from the National Hospital Insurance Fund (NHIF) to SHIF was done without public consultation or consent to transfer sensitive personal data.

This ruling now throws the future of SHIF—and by extension the government’s UHC financing model—into turmoil. The SHIF was designed to replace NHIF and form the backbone of President Ruto’s efforts to ensure health coverage for all Kenyans. The scheme was to be funded primarily through the 2.75% deduction from salaried individuals’ gross pay.

With the High Court’s declaration, the collection of SHIF deductions is now in legal limbo, and the government may be forced to either suspend the program or return to the drawing board to craft a constitutionally sound alternative.

The ruling also comes at a time when the government is under mounting pressure over its fiscal policies and revenue-raising strategies. The court’s decision is expected to fuel further debate on the legitimacy of other recently introduced levies, including the Housing Levy, which is also facing legal challenges.

As of now, the government has not issued an official response, but it is expected that the Attorney General’s office and the Ministry of Health will consider appealing the decision or seeking alternative legal routes to fund UHC.

Meanwhile, Kenyans await clarity on whether the deductions already made under SHIF will be refunded—and what the future holds for the country’s healthcare funding model.