The Real Cost of Kenya’s Proposed 2026 Tax Reforms

Kenya’s proposed Finance Bill 2026 has triggered widespread debate across the country, with youth groups, traders, and business owners warning that the new tax measures could deepen the cost-of-living crisis and lock more young people out of the digital economy.

The Bill, now before the National Assembly for public participation, introduces several tax proposals targeting mobile phones, second-hand clothing imports, digital transactions, and online financial systems.

Parliament has invited Kenyans to submit memoranda and views on the Bill before May 25 in line with Article 118 of the Constitution, which requires public participation in legislative processes.

“The Clerk of the National Assembly hereby invites the public and stakeholders to submit memoranda on the Finance Bill 2026,” Parliament said in its public notice.

Proposed Phone Tax Sparks Youth Concerns

One of the most controversial proposals is a planned 25 per cent excise duty on mobile phones and communication devices.

According to reports on the draft Bill, the tax would be charged when a device is activated on a mobile network, allowing authorities to track compliance through telecom systems.

Economists and digital rights activists warn that the move could significantly increase smartphone prices once VAT and other charges are added.

For many young Kenyans, smartphones are no longer luxury items. They are work tools used for online jobs, content creation, mobile banking, freelance work, and small businesses run through TikTok, Instagram, and WhatsApp.

Financial inclusion experts have previously argued that affordable digital access is critical to economic growth in Kenya’s expanding online economy.

“Young people are being pushed towards digital jobs, but the tools needed to survive online are becoming more expensive,” one Nairobi-based online trader said during discussions on social media.

Mitumba Sector Faces New Tax Pressure

The Finance Bill also introduces a presumptive tax framework targeting imported second-hand clothes, commonly known as mitumba.

Under the proposal, imported clothes would attract VAT at the port before tax authorities assume a fixed profit margin and impose income tax upfront.

Traders at markets such as Gikomba fear the additional taxes will eventually be transferred to ordinary consumers through higher clothing prices.
The mitumba sector supports thousands of informal traders and remains one of the main sources of affordable clothing for low and middle-income families.

KRA Expands Oversight on Digital Transactions

The Bill also reflects the Kenya Revenue Authority’s growing push to widen the tax base through digital monitoring systems.

Recent reforms propose stronger integration between KRA systems, M-Pesa, and other digital payment platforms to improve real-time tax collection and compliance.

At the same time, cryptocurrency and virtual asset platforms may now be required to share transaction data and user information directly with KRA under proposed regulations linked to the Virtual Asset Service Providers Act 2025.

Some small business owners and online workers say the growing monitoring powers raise fears about over-taxation and tighter surveillance of already struggling businesses.

Memories of 2024 Protests Still Fresh

The debate comes less than two years after the deadly 2024 anti-Finance Bill protests that saw thousands of young Kenyans take to the streets over taxation and economic hardship.