Former Law Society of Kenya president Faith Odhiambo mounted a pointed critique of the proposed Finance Bill, 2026, warning that several measures before Parliament risk overburdening ordinary Kenyans, small businesses and investors while doing little to improve compliance or economic growth.
In a detailed analysis of the Bill published on April 30, 2026 and now under parliamentary consideration, Odhiambo acknowledged the government’s fiscal objectives as broadly reasonable, noting that the Treasury is targeting Sh3.63 trillion in revenue for the 2026/27 financial year and projecting a budget deficit of 5.3 per cent of GDP, up from 4.7 per cent in the current cycle.
However, she argued that the distribution of the tax burden raises “serious concern.”
Among the proposals drawing criticism is the plan to shorten tax filing timelines. The Bill seeks to move the income tax return deadline from June 30 to April 30, while nil returns would be due by January 31.
According to Odhiambo, the changes would compress audit completion periods and increase compliance pressure on small businesses and individual traders.
“For small businesses and individual traders, this is not administrative reform. It is an additional compliance cost they can ill afford,” she stated.
The proposed taxation regime for second-hand clothing traders, commonly known as mitumba dealers, also came under sharp scrutiny.
The Bill introduces a new Section 12H to the Income Tax Act that would deem profits at five per cent of the customs value of imported goods, payable upfront before the Kenya Revenue Authority releases the goods.
Under the proposal, a trader importing a bale worth Sh1 million would pay Sh50,000 in tax regardless of whether the business ultimately makes a profit or incurs a loss.
“I cannot in good conscience describe this as equitable,” Odhiambo said.
She further criticised the proposed increase in residential rental income tax from 7.5 per cent to 10 per cent, arguing that the government has failed to first address weak enforcement mechanisms.
“Absent a serious enforcement framework, this will drive non-compliance rather than revenue,” she warned.
The Bill also proposes removing VAT exemptions on money transfers and payment processing services, a move Odhiambo said could undermine financial inclusion by making digital transactions more expensive for millions of Kenyans who rely on mobile and electronic payment systems daily.
She additionally raised concern over provisions that would classify interchange and merchant service fees as management or professional fees subject to withholding tax, arguing that the measure could complicate automated banking processes and eventually shift costs to consumers.
On corporate taxation, Odhiambo criticised amendments to Section 24 of the Income Tax Act that would allow the Kenya Revenue Authority to deem at least 60 per cent of a company’s undistributed income as taxable dividends.
She argued the proposal ignores legitimate business decisions such as reinvestment, working capital retention and expansion planning.
“It is a retrogressive measure that sends the wrong signal to the investors Kenya needs,” she said.
The Bill further proposes a 25 per cent excise duty on telephones for cellular and wireless networks, a measure she described as punitive in a country where mobile phones are central to banking, communication, business and access to government services.
On employment taxation, Odhiambo noted that many salaried Kenyans had expected relief through a restructuring of PAYE tax bands, but the anticipated changes are absent from the Bill.
“That is not a minor omission. An explanation is owed to every employed Kenyan who was waiting for it,” she said.
Despite her criticism, Odhiambo acknowledged several positive provisions within the Bill.
She welcomed the reduction of corporate tax for non-resident companies from 37.5 per cent to 30 per cent, describing it as beneficial for Kenya’s investment climate.
She also praised the extension of the tax amnesty programme to cover liabilities up to December 31, 2025, terming it a meaningful pathway toward compliance.
Additional measures she described as sensible include VAT exemptions on electric buses, bicycles, dialysers, animal feed raw materials and public-private partnership infrastructure projects.
She further welcomed provisions clarifying trust taxation to avoid double taxation of beneficiaries, as well as recognition of gratuity contributions as exempt income.
Even so, Odhiambo cautioned Parliament against hastily passing the legislation without rigorous scrutiny.
“We cannot afford a repeat of June 2024,” she warned, in reference to the nationwide protests that erupted over the previous Finance Bill.
“Parliament must discharge its oversight role with the seriousness this moment demands. They should not merely rubber-stamp what the Treasury has placed before it. Every clause must be scrutinised. Every punitive or ambiguous provision must be rejected or amended.”
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