Every year, Kenya’s Finance Bill arrives as a dense document of tax proposals — and every year, the question is the same: who bears the burden? The draft Finance Bill 2026, published on April 30, 2026, is no different. Authored and reported on by Luke Anami for The East African, the bill outlines an ambitious revenue target of $3.63 trillion for the 2026/27 fiscal year, alongside a widening budget deficit projected at 5.3 per cent of GDP—up from 4.7 per cent the previous year. What lies beneath those numbers, however, is a set of proposals that many Kenyans will feel in their pockets long before the fiscal year closes.
A tax on the tools of everyday life
Perhaps the most striking proposal in the bill is a 25 per cent excise duty on smartphones. In a country where the mobile phone is not a convenience but a necessity — used to send money via M-PESA, access government services, run small businesses, and stay connected — taxing the device itself amounts to taxing participation in modern economic life.
As interviewed by Anami, Odhiambo’s framing is hard to argue with. Mobile penetration has been central to Kenya’s reputation as a fintech leader in Africa. A device tax at this level risks reversing progress on digital inclusion, especially in lower-income households where even mid-range smartphones represent a significant expenditure.
Digital financial services lose their VAT shield
Compounding the smartphone levy is the Bill’s proposal to strip away existing VAT exemptions on money transfers and payment processing. These exemptions were not arbitrary — they were deliberately put in place to encourage digital financial inclusion. Mobile money services have brought millions of Kenyans into the formal financial system precisely because they were accessible and affordable. Removing those exemptions makes them more expensive, which tends to push cost-conscious users back toward cash — the very outcome a broader tax base strategy should be trying to avoid.
The irony is difficult to miss: a government that has championed digital transformation as a development strategy is now considering making digital transactions costlier for the people it claims to be reaching.
Mitumba traders face a blunt instrument
The second-hand clothes trade — known locally as mitumba — supports a significant informal economy across Kenya. The new Bill inserts Section 12H into the Income Tax Act, effectively deeming a 5 percent profit on the customs value of imported goods as a flat tax, payable upfront before KRA releases the goods. This means a trader importing a bale valued at $1 million would owe $50,000 in tax — regardless of whether they actually make a profit or record a loss.
That is not progressive taxation. That is a fixed cost that hits small traders hardest, since their margins are thinner and their capacity to absorb a pre-emptive levy is far lower than that of larger commercial importers. Critics have rightly described this as inequitable — and it is difficult to see how it aligns with any credible policy to support informal sector livelihoods.
The PAYE silence is its own statement
If there is one omission in the Bill that has drawn the most pointed criticism, it is the absence of any restructuring of Pay As You Earn tax bands. For months, salaried Kenyans had been led to expect relief — a restructuring of PAYE thresholds to reduce the burden on workers already stretched by the cost of living. The Finance Bill 2026 contains no such provision.
In policy terms, an omission can be as consequential as an inclusion. Salaried workers are among the most consistently taxed segments of Kenya’s population — their income is visible, trackable, and easily deducted at source. Promising relief and then quietly shelving it erodes the credibility of the budget process itself.
Filing deadlines tighten
The Bill also moves the income tax return deadline forward to April 30 — two months earlier than the current June 30 deadline — and compresses nil return filing to January 31. On the surface, earlier filing might be framed as an efficiency measure. In practice, it places additional administrative pressure on individuals and small businesses with limited accounting capacity, potentially increasing compliance costs for those least equipped to absorb them.
Kenya’s Finance Bill 2026 reflects a government chasing revenue targets in a constrained fiscal environment. But revenue strategy that repeatedly reaches for the most visible and accessible taxpayers — salaried workers, small traders, mobile phone users — without broadening the base in meaningful ways risks deepening inequality while undermining the very digital and financial inclusion gains that have defined Kenya’s economic narrative. Parliament still has the power to amend this Bill before July 1, 2026. The proposals above deserve rigorous public debate — and, where warranted, revision.
This commentary is based on original reporting by Luke Anami, published in The East African on May 10, 2026. All factual claims are drawn exclusively from that article. The analysis and editorial perspective are the author’s own. Quotations from Faith Odhiambo, former President of the Law Society of Kenya, are sourced from the original report.
