In typical government style Kenyans have been forced into a Social Health Insurance Fund where a tax of 2.75% of their perceived income has been added as an additional tax burden. We proposed a cap of KES 5,000 that was initially considered then rejected by a SHA that still does not have a KMA board representative.
To add on the Kenya Kwanza tax burden, that disproportionately affects employed people, tHe SHIF tax is a significant additional tax, particularly in the context of unmatched health services whose financing should be tax-funded, but cleverly pushed to employees.
A review of the tax burden is:
– Housing levy of 1.5% of gross salary of employed personnel for houses they will never own.
– An increased income tax reaching 35%
– An increased credit and mortgage tax enviromnment. Mortgage rates increased by 8% points in Kenya Kwanza regime period. This was unfortunately also applied on mortgages taken out during a previously favorable Jubilee policy regime. The excuse used to hike mortgage and credit rates is that the government has increased the Central Bank Rates (CBR). Shouldn’t housing levy then be exempted from those with previous mortgages?
– This is coupled with the increase in VAT on fuel that increaaed the tax by another 8% and other taxations such as NSSF. Cummulatively taxation in Kenya is close to 50%.
– Coupled with this is the largesse and excessive expenditure of tax money by State Officers.
– Shady deals cap the problems that will lead to an increase in the cost of living for the holoi poloi. My feeling is that State Officers who commit Kenyans to this economic slavery should be individually held liable.
NHIF to SHA
In health the government is transitting to Social Health Authority (SHA) from National Health Insurance Fund (NHIF). Whereas I think the framing of SHA addresses some of the issues yhat emerged in 2019 a review of NHIF was done with a view to improve it, a process that KMA took part in, the government has really tried to paint NHIF as black as possible to justify SHA.
In my view the government is totally complicit in some of the failings of NHIF both real & perceived. The major problem faced by healthcare in general & of NHIF in particilar is funding. And guess who control funds – Government! The major point of divergence I have is the mode of funding mobilization from overtaxed people by additional taxes like ybe SHIF Tax.
NHIF OWES HEALTH FACILITIES BILLIONS
Health facilities are owed billions of shillings by insurances, NHIF, incliding schemes run for police & teachers, for services they rendered and incurres costs in rensering. The government is a key culprit of this, failibg to honor ots fair share of the debt. Even with movement to SHA the issues of non payment have not been addressed. The major question is when will health facilities be paid what they are owed? As a result of non-payment by NHIF (read government) health facilities have had to downgrade by laying off health workforce and some have even ground to a halt. Some facilities have had to close. These health faciities owe doctors millions of shillings and they do not know when they will be paid. IF THESE DEBTS WOULD HAVE BEEN PUT THROUGH THE ETIMS SYSTEMS DOVYORS EOULD HAVE BEEN IN A LOT OF TROUBLE WITH DOUBLE JEOPARDY – THE KENYA REVENUE AUTHORITY (KRA) WOULD CLAIMING TAX ON ETIMS ENTRIES, YET THE MONEY REMAINS UNPAID.
ETIMS ON DOCTORS INVOICES (CLAIMS)
That brings me to the topic of ETIMS ON DOCTORS’ INVOICES. Whereas the idea of ETIMS may be noble, it’s execution for doctors invoices is wrong and does not address the problem highlighhted above. @Kenya Medical Association filed a court case against KRA after numerous meetings to try to get KRA to understand where doctors are coming from. KRA where insisting on visibility of doctors’ earnings. Doctors were insisting that transactions were not equivalent to earnings. When a doctor sees a patient and raises a claim, this is not equivalent to getting paid. To make a doctor-patient encounter without payment a taxable item is to turn the doctor into government, where they contribute both their services pro bono & go ahead & get charged for the pro bono service through KRA ETIMS portal. Philanthropy should be voluntary & not forced via ETIMS. For the visibility ossue that KRA wanted to address, the doctors pointed out to KRA that the withholding tax certificate that is sent to KRA once a doctor is paid is adequate.
The ruling for KMA vs KRA case had come up on August 16, 2024. They judge handling the case reported that the judgment would be given on notice, that means that the judgment would be posted on the legal platforms at sometime in future. It is yet to be made. At about the time when the judgment was to be given, the finance act of 2023 was declared unconstitutional. The finance act 2023 was what made ETIMS invoicing mandatory for non-VAT services. By extension they use of ETIMS for doctors invoicing was rendered unconstitutional. They Finance Act case has now reached the Supreme Court.
In the meantime, doctors are being forced to issue ETIMS receipts on services that have not been paid for by hospitals and in insurance companies. Some of these institutions have declined to receive invoices from doctors who do not accompany theor invooce claims with an ETIMS receipt. Many doctors have stopped seeing hospital and insurance patient who demand ETIMS invoice beforr payment for fear of paying tax for monies they may never receive. Ot’s estimatrd that 35-40% of Kenya’s doctor-patient claims are not paid or delayed so long aa to lose time- value of money. Examples abound including the NHIF debts being pshed to SHA.
It is important to know that onxe KRA recognizes a tax debt for you nonpayment of that liability attracts penalties. So it is safe to say that when you recognize a transaction in the E TIMS system, and you are not paid and tax is due, you suffer the danger of not only not being paid, but also paying tax for money you may never receive and also paying penalties on the same.
NO ETIMS BEFORE REMIITTANCE
To address this problem, and because the year is drawing to a close, and because hospitals and insurance companies are blackmailing doctors to give E TIMS receipts for money they have not received claiming KRA demands it, Kenya Medical Association will convene a huge meeting with the insurance, regulatory authority, insurance companies, social health, authority, Kenya Association of Private Hospitals (KAPH), Rural Urban Private Hospitals Association (RUPHA) with the following resolution:
Doctors will issue E TIMS receipt on remittance amounts ie once the doctor is paid, then and only then woll they issue an ETIMS receipt.
This will solve three problems:
The first is that doctors will not be tax liable for payments they have not received and will only be tax-due for thr exact amounts they receive (devoid of administrative fees).
The second is that insurance companies in hospitals will not use the doctors ETIMS receipts to expense themselves from KRA without payment to the doctor.
The third and equally important is that cash will flow in the health ecosystem. One of the major setbacks impeding universal health coverage was retention of monies for healthcare facilities and providers for services already rendered. This simple move of ensuring timely payments to healthcare providers (and by extension yo KRA) will accelerate universal health coverage because services will continue to be rendered, health facilities and providers will remain afloat and alive, and the general economy will improve with an improved cash flow in the system. More people will ne health for KRA to look for them!