MEMORANDUM BY THE NATIONAL COUNCIL OF CHURCHES 9F KENYA TO THE NATIONAL ASSEMBLY FINANCE AND PLANNING COMMITTEE ON THE FINANCE BILL 2026
MAY 29, 2026
To
Samuel Njoroge
Clerk of the National Assembly
P. O. Box 41842, 00100
NAIROBI
1. Introduction
Established in 1913, the National Council of Churches of Kenya (NCCK) is the oldest and largest Christian Churches umbrella body in the country. It has a presence in all the wards in the country through the member churches and organisations, and has well established Ward Committees, County Coordinating Committees, Regional Committees, and a governance structure at the national level. All officials at the different levels are elected by the members.
The work and identity of the NCCK are primed to attain the Vision of “One Church, United in Faith and Mission witnessing to Jesus Christ and Transforming lives”; and guided by the Mission “Holistic transformation of lives for a just, resilient and sustainable society”.
By bringing together 50 member churches and organisations, the NCCK bears the collective mindset of just under 16 million Kenyans.
Within the last month, we have had regional forums with representatives from 44 counties culminating in a national consultation that focused on the Finance Bill 2026. This Memorandum is a summation of the perceptions and input from the 44 counties.
2. Background
The Public Finance Management Act requires the Cabinet Secretary for Treasury to prepare and submit to Parliament a Finance Bill each year. The Bill is to set out revenue raising measures for the national government, with the requirement that the measures proposed should “consider the impact on development, investment, employment and economic growth”.
We commend the National Assembly for facilitating this Public Participation on the Finance Bill, the budget proposals and other fiscal proposals. It is our prayer that the National Assembly will the input by the public with grace and seriousness, recognizing that Article 1 of the Constitution of Kenya states that sovereign power belongs to the people of Kenya.
Contextually, the Finance Bill 2026 has been developed alongside a national budget of KSh 4.78 trillion which troublingly has a KShs 1.1 trillion deficit. The failure by the Finance Bill 2026 to present concrete actionable measures for the government to cut expenditure to fit within the projected income or strategically grow the economy to expand government income is a major policy failure that the National Assembly, as the people’s representatives, should demand is remedied.
Indeed the hope and anticipation of Kenyans was that through the Finance Bill 2026, the government would establish a growth-oriented micro and macro economic environment designed to spur business recovery, production enhancement and industrialization. Further, Kenyans were hoping for improved financial accountability and safeguarding to curtail the endemic corruption that has proved to be the revenue loss in the country.
Unfortunately, the provisions in the Finance Bill 2026 are the direct opposite of this aspiration. If passed without major revisions, the Finance Bill 2026 is bound to cripple economic growth, impoverish Kenyans who will have to spend more on taxation without requisite increase of incomes, and infringe on basic constitutional rights of the citizens. We remind the Members of the National Assembly that if you proceed with this Bill, you will be falling into the same judgment as the leaders of Israel of whom God says in Amos 2: 6 – 7
This is what the Lord says, “For three sins of Israel, even for four, I will not turn back my wrath. They sell the righteous for silver, and the needy for a pair of sandals. They trample on the heads of the poor as upon the dust of the ground and they deny justice to the oppressed.”
Should we choose to legislate the injustices and oppressions contained in the Finance Bill 2026, then we must be prepared to face the same fate as the nation of Israel did at that time.
3. Principles of Taxation
In section 1.5, the National Taxation Policy (2022) provides the Guiding Principles of Taxation. Of these, we take note of subsections five and six:
(v) Sustainability: the tax system shall attract minimal changes over time, be coherent with other Government policies and support sustainable economic development.
(vi) Economic growth and efficiency: the tax system shall mitigate against distortions and expand the productive capacity of the economy.
These provisions align to the universal principle that the government taxes incomes, not expenses, and tax levels are premised on the ability to pay. It is therefore inimical to find that the tax measures outlined in the Finance Bill 2026 are primarily focused on increasing revenue without attendant consideration of the payers’ ability to pay.
While being mindful of the government’s need to generate revenue to fund operations and essential services, we recommend that the Finance Bill 2026 be withdrawn to facilitate a complete overhaul to a people-centric economy growing premise. Failing this, we recommend the following essential amendments of the Finance Bill 2026 before it is passed by the National Assembly.
4. Clauses / Provisions Proposed for Inclusion in the Finance Bill 2026
| CLAUSE | DESCRIPTION | IMPLICATION | RECOMMENDATION | JUSTIFICATION (Legal and Policy Basis) |
| Fiscal Accountability | The Bill widens the revenue base and expands KRA enforcement powers but does not address public expenditure leakages, tax-expenditure opaqueness, debt sustainability, or supplementary budgets indiscipline | Kenyans are being asked to bear greater burdens and surrender basic rights without matching accountability | Add provisions to require tax-expenditure disclosures, pending bills settlement plans, debt transparency, supplementary budget controls, and publication of audit follow-up actions | Constitution of Kenya Article 226 provides for openness and accountability in financial matters (a), equal sharing of benefits and burden of public borrowing (c), and financial reporting to be clear (e). Article 226 requires public accounting officers to be accountable to elected leaders for all accounts to be audited |
| Cross-cutting Burden Implications | The bulk of tax variations in the Bill affect phones, digital payments, food production health inputs, green transition, small and informal traders | Consideration of the provisions individually masks the cumulative burden being laid on low-income households, the youth, informal workers and small scale businesses | Review the Bill to safeguard food security, health, green transition, digital inclusion, and s | The National Tax Policy as well as Article 201 of the Constitution require equity, certainty and evidence-based tax design |
5. Clause by Clause Observations and Recommendations
| CLAUSE | DESCRIPTION | IMPLICATION | RECOMMENDATION | JUSTIFICATION (Legal and Policy Basis) |
| 2 (b) | Adds interchange and merchant fees arising from card transactions in the definition of “management or professional fee” | Will subject payment fees including Mpesa, Visa, Mastercard, etc, to withholding tax 5% (residents) and 20% (non residents), increasing the cost of digital transactions for merchants and consumers. This will push merchants to use cash transactions, which increases security risks, in addition to contradicting the government’s financial inclusion agenda. | Delete the amendment | Article 201(b); Micro and Small Enterprises Act requires protection of MSMEs; Central Bank of Kenya’s National Payment Strategy (2022 – 2025) targets 80% digital transaction penetration, which will be rendered unattainable; Less tax income as more transactions shift off-grid |
| 2 (c) | Definition of “royalty” expanded to include proprietary digital platforms, payment networks, payment card schemes, payment processing, switching, clearing and settlement systems | Will convert ordinary service and payment processing charges (including Mpesa, Visa, Mastercard, Flutterwave and every fintech payment platform) into royalties, causing them to attract 20% withholding tax and therefore double taxation when applied alongside Clause 2 (b) | Delete Sub Clause (vii), and instead tax digital payment infrastructure through targeted excise rather than withholding tax Parliament should require Treasury to conduct a Financial Impact Assessment before adopting any measures that increase costs of digital payment infrastructure. | Payment processing should not be deemed royalty merely because it uses a platform. Article 201 requires certainty in taxation The Organisation for Economic Cooperation and Developmtnt (OECD) Model Tax Convention distinguishes ‘royalties’ from services fees and payment processing charges. Classification of payment processing as ‘royalties’ is inconsistent with OECD BEPS Action recommendations adopted under Kenya’s National Tax Policy. By aligning with the OECD and international tax standards, it will prevent ambiguity, as well as educe tax related disputes. |
| 4: | Introduces a new tax on non-resident persons earning rental income from Kenyan property. Tax payable monthly by the 20th of the following month. Registration through a ‘simplified framework’. Final tax. | The rate is not specified in the clause, it says ‘the rate specified in the Third Schedule’ but no corresponding Head is inserted in the Third Schedule by this Bill. This is a legislative lacuna that makes the provision unenforceable. Further, ‘simplified registration’ is undefined, creating enforcement uncertainty. No anti-avoidance provision prevents non-residents from routing rental income through Kenyan resident nominees to avoid the new tax. In a nutshell, it will discourage foreign investment. | Expressly state the tax rate in the clause or explicitly amend the Third Schedule to include a ‘Head C’ or equivalent for non-resident rental income tax. Add a deemed agency provision where a resident collects rent for a non-resident. | Article 10, Constitution. Existing s.35(3)(j), Cap. 470, already taxes resident-collected non-resident rent at 30% WHT. Inconsistency with this existing provision must be resolved. Tax Procedures Act, s.8 on registration and compliance framework must be clear. |
| Clause 6: | Amends s.9 of Cap. 470 to require tax on shipping / freight income to be paid within FIVE DAYS of receipt of payment or ship departure from port. | Five days is an impossibly short compliance window for an industry managing complex international freight logistics. Port clearance, documentation, and foreign currency settlements routinely take 7–21 days. This will create routine technical defaults, triggering penalties on otherwise compliant operators, unless if the government wants to raise more income from penalties than the payable taxes. Smaller shipping agents and logistics companies, largely MSMEs, will be disproportionately penalized. | Replace ‘five days’ with ‘twenty working days’, which will be consistent with WHT remittance standards under s.35(5) of Cap. 470. Apply a force majeure provision for port delays and documentary processing. | Tax Procedures Act, s.38 indicated a general 20-day standard for WHT remittance. The Proportionality principle as per Article 24, Constitution is another significant factor. The Kenya Association of Manufacturers (KAM) and the Kenya International Freight and Warehousing Association (KIFWA) have previously flagged unrealistic tax timelines. |
| Clause 7, 17 & 22 | Adds scrap metal sale proceeds and gambling ‘winnings’ as income subject to WHT under sections 10 and 35 of Cap. 470. Winnings and scrap metals taxed at 20% and 1.5% WHT, respectively | Including scrap metal sales as taxable income under section10 (management fees/royalties’ framework) is a misclassification; scrap metal is a physical commodity, not a service payment. The appropriate vehicle is presumptive tax or advance tax. The 1.5% WHT on scrap metal sales (per Clause 22) is disproportionately high for Jua Kali metal workers who already operate on razor-thin margins. The definition of ‘winnings’ excludes ‘the amount staked’ but in practice KRA will struggle to verify staked amounts without access to operator records. | Set a minimum threshold of KSh 50,000 per transaction before WHT on sale of scrap metal applies to exempt subsistence waste-pickers from the compliance regime. Further, registered jua kali operators should be excluded. Kenya’s gambling industry is dominated by large, politically connected operators. The WHT on winnings hits players, not operators. The government should simultaneously impose windfall levies on gambling operators’ profits. Parliament should require the Treasury to introduce a parallel levy on gambling operators’ gross gaming revenue (GGR) before imposing additional taxation on players — a progressive, not regressive, approach to taxing the gambling sector. | Scrap Metal Industries Act, 2015 — the existing licensing regime for scrap metal dealers. Small-scale scrap traders are exempt from formal registration. Taxing them at WHT rates is inconsistent with the National Tax Policy exclusion of subsistence-level economic activity. Gambling Control Act, 2025 the primary gambling regulation should determine tax base definitions. |
| 10, | Proposes to amend section 12 of the Income Tax Act. by introducing a new clause on installment tax. | Uses masculine language. “To the best of his knowledge, he will have no income.” | Amend to have gender inclusive language in the Finance Bill and also across the entire Income Tax Act. | |
| 15: | Repeals s.23A of Cap. 470 entirely. | Section 23A provided income tax exemption for individuals registered on the Ajira Digital Programme for 3 years (subject to conditions). Its repeal removes a key incentive for digital/gig economy participation by youth. An estimated 500,000+ Kenyans registered on the Ajira platform. This is a regressive reversal of a youth employment support measure with no replacement incentive offered. | Delete the Clause Instead, Parliament should amend the First Schedule to extend the Ajira Digital exemption to 5 years, and to broaden eligibility to include all KRA registered gig economy workers earning below KES 1.2 million per annum | Kenya’s Vision 2030 digital economy pillar. ICT Policy Framework 2022. National Youth Policy is committed to reducing youth unemploymentn (currently ~35%). UNCTAD Digital Economy Report 2023 indicates tax incentives are a proven tool to formalize gig economies without stifling them. |
| 18 & 19: | The Bill moves the income tax returns deadline from 30 June (the last day of the 6th month after year-end) to 30 April (the last day of the 4th month). Nil returns must now be filed by 31 January (end of 1st month). Treasury’s stated rationale: to allow KRA to verify returns within the same financial cycle and improve revenue forecasting. This aligns with Section 75 pre-populated return powers introduced by Clause 48 | Compressing the filing window by two months significantly increases compliance costs for corporates, partnerships and professionals who require completed audit financials before filing accurate tax returns. Most auditors cannot complete audits by April for December year-end clients. The nil-return deadline of 31 January is particularly aggressive and will disproportionately affect informal sector operators, sole traders and small businesses who have limited access to accountants and tax agents. The compliance burden is being transferred from the state to taxpayers while disaggregating Kenyans into classes and different filling dates; this raises inequality concerns. | Delete the clauses and retain the current 30th June deadline for all people with income sources, corporates or those with rental income, capital gains or business income. The nil-return deadline of 31 January is unreasonable and should revert to 30 June. | Parliament must require an SME compliance capacity assessment before shortening deadlines that apply to small businesses. The public should also be reliably aware of their obligations and remedies, rather than encountering unintended tax penalties. |
| New | Proposed Amendment of PAYE Band. | A new proviso be added in the Finance Bill ,2026 immediately after section 28 (e) of the Bill to read as follows; (f) by deleting paragraph 1 (Under Head B-Rates of Tax) and substituting therefor the following new paragraph— 1. The individual rates of tax shall be— Monthly Income Band (Ksh) Rate in each shilling Monthly Pay Bands (Ksh) Rate of Tax (%) On the first Ksh. 30,000 – 10% On the next Ksh. 8,333 – 20% On the next Ksh. 461,667 – 25% On the next Ksh. 300,000 -27.5% On amounts over Ksh 800,000 – 30% | It is a fundamental contradiction that an individual Kenyan worker pays a marginal income tax rate of 35% which is five percentage points higher than the corporate tax rate of 30%, despite having no ability to deduct the basic costs of living from their taxable income, as corporations do with business expenses. Kenya is taxing its people harder than it taxes its companies. Higher disposable incomes translate into greater savings and investment including pension contributions, particularly for workers. This reform directly supports the Bottom-Up Economic Model that the government has always championed. | |
| 25: | Removes three definitions from the VAT Act (Cap. 476) that previously gave meaning to the Commissioner’s use of electronic systems in VAT administration. | Deleting these definitions without replacing them in the body of the Act creates interpretive ambiguity for VAT audits and assessments conducted through TIMS/eTIMS. It may inadvertently undermine legal certainty around electronic VAT invoicing compliance, a system already plagued by SME adoption challenges. Courts may find it difficult to give legal effect to penalties imposed through electronic systems if the enabling definitions are removed | Instead of complete deletion update them to reflect current technology standards (AI, cloud, eTIMS) and cross-reference the Tax Procedures Act s.75 definitions for consistency. | Tax Procedures Act, section 75 on electronic system definitions should be harmonized across all Tax Acts, not deleted. eTIMS rollout mandate (KRA 2024), requires clear statutory basis. |
| 31(a)(ix): | Introduces new VAT exemptions for dialyzers, scrap metal, pharmaceutical raw materials, sugarcane transport, IMPORTED MOBILE PHONES (para. 163), motorcycles (tariff 8711.60.00), electric bicycles, solar/lithium batteries, electric buses, Battery Electric stoves, second-hand clothing (mitumba) domestic supply only. | MOBILE PHONES: Para. 163 exempts imported/locally purchased phones but simultaneously Clause 36 of the Bill imposes 25% excise duty on all phones. The net effect may be counterproductive — VAT exemption saves ~16% but excise costs 25%. The VAT exemption may not reduce consumer prices if excise is passed through first. Worn clothing and other worn articles (para. 169): Exempting second-hand clothing from VAT on domestic supply only (not importation) is discriminatory between domestic traders and importers, effectively maintaining a cost barrier that benefits existing large importers. | For phones, coordinate VAT exemption and excise duty to ensure a net price reduction. Consider a 10% flat excise rate on all phones to ensure affordability and grow digital inclusion. For mitumba, extend VAT exemption to importation as well, consistent with the domestic supply exemption. | Finance Bill 2023 (overturned Finance Act 2023), previous phone VAT exemption removal caused public revolt. VAT Act, section 7, zero-rating and exemption must be clearly scoped. |
| 31 (b)(i) | Amends the VAT exemption for financial services to EXCLUDE ‘money transfers, payment processing, settlement, merchants acquiring, gateway or aggregation services supplied over a software or platform for a fee or commission by a payment service provider.’ | This is the most significant and regressive VAT change in the Bill. Digital payment services such as M-Pesa, Airtel Money, Pesalink, Flutterwave, mobile banking, are currently VAT-exempt as ‘financial services’. Removing this exemption will impose 16% VAT on every digital transaction fee: every M-Pesa send, every merchant payment, every RTGS settlement. Cost will be passed on to consumers. The poor use mobile money the most, this is a regressive tax on financial inclusion. | Delete the Clause to retain the full VAT exemption for digital payment services accessible to the public (M-Pesa, mobile banking, agency banking). At most, limit the exemption removal to B2B payment processing platforms with monthly volumes exceeding KES 500 million. Cross-reference with CBK Payment Service Provider (PSP) licensing framework to define the boundary. | Financial Inclusion Report, According to CBK 2024, 87% of Kenyans use mobile money; removing the exemption will raise barriers for 15 million unbanked users. VAT Act, s.2 — ‘financial services’ has historically been interpreted broadly to include digital payments. |
| Clause 32 | Deletes the following zero-rated categories, moving them to the Exempt Schedule (which removes input tax recoverability): pharmaceutical inputs (para. 11); sugarcane transport (para. 21); locally assembled mobile phones (para. 29); motorcycles (para. 30); electric bicycles (para. 31); solar/lithium batteries (para. 32); electric buses (para. 33); animal feed inputs (para. 34); BE stoves (para. 35). | Moving these items from zero-rated to exempt does not reduce consumer prices, it removes the manufacturer’s right to claim back input VAT, INCREASING production costs. Zero-rating benefits producers; exemption benefits only the final consumer on that specific supply but cascades tax through the value chain. The move from zero-rated to exempt on solar batteries and electric vehicles RAISES THE EFFECTIVE TAX BURDEN on clean energy products, contradicting the green economy transition. Animal feed manufacturers will face higher costs that translate to higher food prices. Additional cost burden will also fall on sugarcane farmers, already under pressure from milling sector inefficiencies. As noted by the Agriculture PS in 2025 Finance Bill proceedings, this ‘will be a setback for food and nutritional security.’ Removing zero-rating from pharmaceutical manufacturing inputs means medicine prices will rise, hitting the lowest-income Kenyans hardest. The Bill simultaneously exempts new items like dialysers (Para 158), which is welcome but does not offset the cost increase from the reclassification. | Delete the Clause to restore zero-rating (not just exemption) for: (i) solar and lithium-ion batteries; (ii) electric motorcycles and buses; (iii) animal feed and pharmaceutical inputs. Zero-rating, not exemption, is the correct mechanism where the policy goal is to reduce consumer prices and support domestic manufacturing. Parliament should adopt a standing rule that no agricultural input, food production input, or essential medicine input may be reclassified from zero-rated to exempt without a published Food Security and Affordability Impact Assessment signed off by the Cabinet Secretaries for Agriculture, Health, and Finance jointly | VAT Act s.7(2) — zero-rating means no VAT charged AND input tax fully recoverable; this double benefit is what drives price reduction for manufacturers. National Energy and Petroleum Policy (2018) clean energy transition requires fiscal support at production stage, not just at consumer stage. National Tax Policy — ‘tax policy shall not create perverse incentives against green economy. |
| 34 & 35 | Shifts the excise duty liability timing on telephones from importation to ACTIVATION of the phone (SIM/network connection). The Cabinet Secretary may make regulations. | This is a SIM-tax by another name. Every time a phone is activated on a network, duty becomes payable. This will: (a) create a parallel grey market of pre-activated phones or unregistered SIMs; (b) discourage phone replacement/upgrade cycles; (c) require telcos and KRA to create a massive real-time activation monitoring infrastructure that does not currently exist. The delegated regulatory power (CS may make regulations) is excessively broad for a measure with such significant consumer impact. This effectively taxes network access as much as device ownership. | Delete the Clause to retain excise duty at the point of importation (current system) where it is administratively cleaner. It will be logistically nightmarish to determine the value of the phone every time it is activated with a new SIM card. | National Tax Policy, Principle 2: ‘Tax administration costs should not exceed the economic benefit of the tax measure.’ |
| 36(a)(i) | Raises excise duty on all ‘telephones for cellular networks and other wireless networks (tariff heading 8517)’ from 10% to 25% of the excisable value. Removing the ‘imported’ limitation, now applies to ALL phones including locally assembled. | A 150% INCREASE in excise on phones. Combined with VAT exemption (neutral), import declaration fee, railway development levy, and activation excise, the effective landed cost of a KES 5,000 smartphone rises by ~KES 1,250 in excise alone. This directly prices out the bottom 40% of the population from owning smartphones. Locally assembled phones are also now taxed at 25%, removing the incentive for the Electronics City SEZ and local assembly. CA (2024) data show 62% of first-time phone buyers purchase in the KES 3,000–8,000 range, a segment that will be devastated. | Revert excise on phones to 10% or below. Apply the higher rate (25%) only to premium phones above KES 30,000. Exempt locally assembled phones from excise for 5 years to protect nascent local assembly (Ngenye Electronics, Mobitek). This creates a clear incentive for local manufacturing. | CA Kenya 2024 — ‘Mobile internet usage is the primary digital gateway for 90% of Kenyans.’ Finance Bill 2023 was withdrawn partly due to public outcry over phone taxation. Article 43 — access to information is a right; smartphones are the primary access tool. KEBS standards for locally assembled phones — these deserve duty protection, not equal treatment with imports. |
| 36(a)(xii)–(xxxiii): | Removes the EAC Rules of Origin (RoO) exclusions from over 20 excise duty descriptions on imported plastics, glass, paper, and printing materials. Previously, goods from EAC Partner States meeting RoO criteria were excluded from excise. Now all imports face excise regardless of origin. | This potentially violates Kenya’s treaty obligations under the East African Community Treaty (Articles 75, 76) and the EAC Customs Management Act regarding preferential tariff treatment for Partner State goods. Imposing excise on goods from Uganda, Tanzania, Rwanda and Burundi that qualify under RoO may trigger WTO dispute or EAC Council of Ministers challenge. It also creates practical trade disruption, Kenyan manufacturers that source packaging from EAC partners will face immediate cost increases. | Delete the Clauses to restore the EAC RoO exclusions. Any decision to remove preferential treatment for EAC goods must be taken through the EAC Council of Ministers, not unilaterally through a domestic Finance Bill. Conduct a treaty compliance review before final enactment. | EAC Treaty, Article 75 — free movement of goods within the Community. EAC Customs Management Act, 2004 — rules of origin framework. Vienna Convention on Law of Treaties — Kenya cannot unilaterally override treaty obligations through domestic legislation. WTO TFA (Trade Facilitation Agreement) — additional obligations against unilateral duty escalation. |
| 40 | Exempts non-resident persons from the requirement to obtain a PIN when opening an account with an investment bank. | Providing a PIN exemption for non-residents at investment banks creates an anonymity shield for foreign investors that does not exist for Kenyan residents. Combined with the VASP automatic exchange provisions, this creates asymmetry, foreign money in investment banks need not be tracked through the PIN system, while Kenyans’ accounts are comprehensively monitored. This may facilitate capital flight and tax-advantaged routing of returns by non-residents through Kenyan investment banks. | Delete the clause to retain the PIN requirement for non-residents at investment banks but simplify the application process (online registration within 5 business days using passport and home-country tax ID). PIN anonymity for investment accounts is inconsistent with FATF requirements for beneficial ownership transparency. | FATF ESAAMLG Mutual Evaluation Report for Kenya (2022), Kenya was rated ‘partially compliant’ on beneficial ownership transparency. Removing PIN requirements for non-resident investment bank accounts will worsen this rating. Capital Markets Act, Cap. 485A requires identity verification for all account holders. |
| 41 | Gives the Commissioner power to reassess a person’s tax liability where they determine (based on third-party information) that a ‘tax avoidance scheme’ was used. The Commissioner can disregard the scheme and tax as if it never occurred. | The definition of ‘scheme’ is so broad (‘any course of action, agreement, arrangement, promise, plan, proposal, or undertaking’) that ordinary commercial restructuring, intercompany loans, corporate reorganizations, and EAC regional expansion could be characterized as ‘schemes’. The provision grants the Commissioner extraordinary unilateral power with a 5-year lookback period. There is NO requirement for the Commissioner to obtain Tax Appeals Tribunal or court approval before issuing the reassessment. This violates due process and natural justice; a taxpayer could be assessed under s.18A simultaneously with being prosecuted for the same transaction. | Delete the Clause. Do not give the Tax Commissioner such powers. Instead (i) require a Principal Purpose Test (PPT) aligned with OECD BEPS Action 6 to define ‘avoidance’; (ii) require the Commissioner to issue a proposed assessment and allow 60 days for taxpayer response before finalization; (iii) exclude routine commercial restructuring and EAC-compliant cross-border transactions; (iv) require TAT confirmation before assessments exceeding KES 50 million | Tax Procedures Act,s.30 — existing objection rights. Article 47 — right to fair administrative action; unilateral Commissioner assessments without hearing taxpayer violate this right. OECD BEPS Action 6 — Principal Purpose Test as the internationally accepted anti-avoidance standard. Finance Act 2020 s.23 (Cap. 470) — existing general anti-avoidance rule already exists and should be strengthened, not paralleled. |
| 42 | Gives the Commissioner broad power to issue income assessments on any person ‘as the Commissioner may deem necessary’ based on third-party information including electronic systems, KRA’s own data, and other law. | This provision effectively replaces the requirement for evidence of income with the Commissioner’s subjective judgment. The phrase ‘as he may deem necessary’ is constitutionally infirmed as it fails the legal certainty test under Article 10. Combined with pre-populated returns (Clause 48), KRA can now issue an assessment, pre-populate a return, and collect tax before a taxpayer has had a chance to object. The burden of proof reversal, taxpayers must disprove KRA’s estimate, is particularly punishing for informal traders, boda-boda operators and hawkers who rarely maintain formal records. Further, this gives KRA undeterred surveillance of Kenyans in contravention of the privacy guaranteed in the Constitution and the Data Protection Act. | Delete the Clause and instead (i) require best-judgment assessments to be based on verifiable income indicators (industry benchmarks, sector turnover data), not merely ‘deemed necessity’. The Commissioner should provide the taxpayer with the specific data and methodology used. (ii) give a minimum 30-day response period before assessment is finalized. (iii) Reverse the burden of proof to the Commissioner for tax assessments (iv) require court orders for access to individuals or company private records | Article 50(2)(i) on the right to adduce and challenge evidence in proceedings. Tax Appeals Tribunal Act indicates that appeals must be meaningful, which cannot happen when the assessment methodology is opaque. |
| 50 | Replaces the existing penalty with: (i) 2× the tax due; (ii) KES 100,000; or (iii) for individuals, KES 10,000, whichever is HIGHER. Due process: Commissioner must first send a notice, taxpayer responds, then penalty if unsatisfied. | Increasing the penalty to two times the tax component makes this potentially the highest proportional penalty in the Tax Procedures Act. For a trader who fails to issue an eTIMS invoice on a KES 5 million transaction, the penalty is KES 10 million, clearly disproportionate. MSMEs still face significant challenges with eTIMS connectivity in rural areas and during power outages. The penalty structure makes no distinction between willful noncompliance and technical or connectivity failure. Additionally, punitive and discretionary penalties create fertile ground for corruption, particularly where taxpayers may seek informal interventions to avoid disproportionate sanctions. Tax compliance systems should incentivize voluntary compliance rather than create enforcement environments vulnerable to rent-seeking behaviour. | Delete the Clause and instead cap the penalty at the higher of KES 50,000 or 25% of the tax due (not 200%). Create an explicit ‘reasonable cause’ exemption that covers network outages, power failure, KRA system downtime, and new registrant grace periods. Require KRA to publish monthly eTIMS uptime data, if system availability falls below 99%, the penalty framework should be suspended. | Article 201(b) of the Constitution requires equitable taxation mechanisms. The Proportionality principle as per Article 24 is also pertinent to observe. |
| 55 | Adds ‘imported telephones for cellular networks’ to the list of goods subject to Import Declaration Fee (IDF, 2.5%) and Railway Development Levy (RDL, 1.5%). | This adds 4% in cumulative fees on top of the 25% excise duty on phones (Clause 36), 16% VAT, and activation excise. The total effective levy on an imported smartphone could approach 60–70% of the ex-factory value. A KES 5,000 smartphone effectively becomes unaffordable for low-income buyers. Previously, Chapter 88 goods (aviation) were exempt from IDF that exemption is now narrowed to specific HS codes, potentially creating administrative disputes. | Exempt phones below KES 10,000 from IDF and RDL in the same way budget phones are recognized as essential access devices globally. If IDF/RDL on phones is retained, coordinate with Clause 36 excise duty so the combined tax burden does not exceed 20% of the excisable value for basic phones. | National Tax Policy, Principle 3 dictates ‘tax expenditure design shall account for the cumulative burden across different taxes.’ CA Kenya (2024) report records that 62% of first-time phone buyers buy phones under KES 8,000. Human rights principle on digital access is increasingly a prerequisite for access to government services, banking, health information and education. |
6. Conclusion
In conclusion, the NCCK urges the National Assembly to listen to the cry and pain of Kenyans who are yearning for a better economic framework that enables them to engage in dignified livelihoods and pay their taxes. When more Kenyans have sustainable income generating engagements, then the government will receive more income without struggling to raise the tax rates. For sure the best way to expand the tax base is by increasing the per capita income of Kenyans, not by reducing the disposable income of the few salaried and entrepreneurial citizens. The foundational ethos and intent of the Finance Bill 2026 and attendant fiscal proposals should be spurring economic growth of every Kenyan, and the national economy will by effect also grow.
On our part, we remain committed to supporting and working for the economic empowerment of individuals and communities, knowing that the beneficiaries grow to become tax payers. It is for this reason that our theme for the next five years is Dignified Livelihoods: Resilient Communities (Galatians 6: 9).
Signed on this 29th day of May 2026 at Jumuia Place, Nairobi.
Rev Canon Chris Kinyanjui
GENERAL SECRETARY
