The Finance Bill 2026 has ignited a fierce political showdown, pitting the government against a united opposition front determined to block what it calls an “economic stranglehold” on citizens and businesses.
Treasury Cabinet Secretary John Mbadi has mounted a vigorous defense of the bill, accusing opposition leaders of spreading misinformation and fabricating clauses to incite public outrage and protests.
At the heart of the controversy is the State’s attempt to reclaim tax-collecting powers it recently lost in a series of high-profile court battles against major corporations. The 57-clause bill, currently before Parliament, seeks to redefine key tax terms and expand the Kenya Revenue Authority’s (KRA) reach after several judicial setbacks.
Treasury Pushes Back Against “Fake Clauses”
CS Mbadi dismissed claims that the bill introduces new land taxes, calling them “pure propaganda.” Opposition figures, including Wiper leader Kalonzo Musyoka, had alleged that the bill would impose annual levies on freehold and leasehold land. “There is no single clause on land taxation,” Mbadi said, emphasizing that the government has no intention of taxing property ownership.
He also refuted reports of new charges on mobile money transfers, assuring Kenyans that ordinary M-Pesa transactions remain untouched. “There are no new M-Pesa taxes. The bill focuses on streamlining existing levies, not punishing everyday users,” he stated.
The “Phone Tax” Controversy
One of the most contentious issues has been the rumored 25% smartphone tax, which triggered widespread online backlash. The Treasury clarified that the proposal is not a new tax but a consolidation measure. The so-called “activation levy” would replace five separate import taxes—currently totaling 55.5%—with a single 25% charge, which the government argues will make smartphones cheaper and simplify compliance.
Rewriting Tax Laws After Court Defeats
The Finance Bill 2026 also represents a strategic legal counteroffensive by the State following a string of court losses that weakened its tax enforcement powers.
- Interchange Fees: After Absa Bank won a Supreme Court case exempting interchange fees from withholding tax, the bill expands the definition of taxable income to bring these fees back under KRA’s jurisdiction.
- Merchant Fees: Following rulings that shielded digital payment platforms like M-Pesa and Pesapal from certain VAT obligations, the bill introduces a 16% VAT on merchant fees to close what Treasury calls a “revenue loophole.”
- Frozen Bank Accounts: Courts had previously restricted KRA’s ability to freeze bank accounts during tax disputes. The new bill seeks to ease those restrictions, granting the authority faster access to suspected tax evaders’ funds.
Opposition and Business Leaders Unite Against the Bill
Opposition leaders, including Rigathi Gachagua and Fred Matiang’i, have called for nationwide resistance to the bill, warning that it will “choke the economy and punish struggling families.” They accuse the government of prioritizing revenue collection over economic recovery.
The Kenya Private Sector Alliance (KEPSA) and local manufacturers have joined the opposition chorus, cautioning that the proposed taxes could cripple businesses, destroy jobs, and undermine regional trade. They argue that new levies on East African Community imports will make Kenyan products less competitive and discourage investment.
Parliament Braces for Heated Debate
As Parliament prepares to debate the Finance Bill 2026, the political temperature continues to rise. The Treasury insists the reforms are essential to stabilize public finances and modernize tax administration, while critics see them as a dangerous overreach that could stifle growth.
With both sides digging in, the coming weeks are expected to deliver one of the most contentious fiscal battles in Kenya’s recent history.
