The Lower Eastern Times Opening The Third Eye
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Kenyan Members of Parliament have removed several controversial tax proposals from the Finance Bill 2026, reducing the government’s expected additional revenue from about Sh129 billion to Sh98 billion.
The changes follow parliamentary scrutiny and public concerns over the potential impact of some of the proposed measures on households, businesses, and essential services.
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Among the major proposals dropped was a plan that would have granted the Kenya Revenue Authority (KRA) wider powers to access taxpayers’ private, personal, and financial information, including trade secrets, without requiring a court order.
Lawmakers also scrapped a proposal to shift excise duty on mobile phones to the point of activation. A related plan to increase excise duty on mobile devices from 10% of customs value to 25% of excisable value was also removed due to concerns over compliance and potential increases in consumer prices.
A proposed 2.5% annual motor vehicle circulation tax, which would have been collected during insurance renewals with a minimum of Sh5,000 and a maximum of Sh100,000, was also dropped.
Treasury’s plan to move several essential manufactured goods and local consumer products from VAT zero-rated status to VAT-exempt status was rejected, alongside a proposed levy on basic and medical items such as diapers, wheelchairs, bicycle tyres, motorcycle tyres, and tuk-tuk tyres.
MPs further discarded a proposed excise duty increase on vegetable cooking oil, citing fears of rising food prices and increased cost of living for households.
Other rejected measures included the introduction of a 16% VAT on financial services, foreign exchange transactions, and the issuance of debit and credit cards, as well as planned increases in internet and mobile money transfer fees.
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Lawmakers also removed a requirement that taxpayers deposit 20% of the disputed tax amount in court before appealing tax tribunal decisions. In addition, a proposal allowing KRA to recover taxes directly through banks and third parties during ongoing disputes was also deleted.
However, not all proposals were rejected. Parliament retained a push to maintain the top Pay-As-You-Earn (PAYE) tax rate at 35%, despite earlier calls to lower it to between 28% and 30%.
Lawmakers also upheld the introduction of a 30% tax regime targeting non-resident individuals and multinational technology companies operating digital services in Kenya.
Additionally, proposals expanding withholding tax obligations on digital marketplaces and card-based transactions were retained in the final version of the Bill.
The revised Finance Bill 2026 now moves forward with a reduced revenue target and fewer controversial tax measures, even as the government maintains that the reforms are necessary to improve tax compliance and support public spending.
