MPs Shield Key Sectors as They Scale Back Finance Bill Tax Proposals

Parliament’s Finance Committee has trimmed several major tax proposals in the Finance Bill 2026. The changes are expected to reduce the government’s anticipated revenue gains while offering relief to businesses and consumers.

The National Assembly’s Finance and National Planning Committee rejected or diluted a number of measures that had been proposed to raise additional revenue for the government. Among the key recommendations was retaining the zero-rated VAT status on a range of manufacturing and agricultural inputs, including animal feeds, pharmaceutical materials, mobile phones, electric vehicles, solar products, lithium-ion batteries and sugarcane transport.

Lawmakers argued that shifting these products to exempt status would increase production costs, discourage investment and create uncertainty in the tax environment. The committee also opposed a proposed excise duty on mobile devices and rejected plans that would have required companies to distribute at least 60 percent of profits as dividends or face additional taxation.

The review further curtailed some of the Kenya Revenue Authority’s proposed powers relating to automated tax assessments and the collection of disputed tax claims, reflecting concerns raised during public participation and stakeholder consultations.

The committee’s position followed submissions from business organisations, including the Kenya Bankers Association and major accounting firms, which warned that some of the proposed measures could negatively affect investment and economic activity.

The recommendations also highlight Parliament’s cautious approach to tax policy following the widespread public opposition and protests that accompanied previous tax proposals. While the committee supported a general anti-tax avoidance rule to strengthen KRA’s ability to tackle tax evasion, and approved an increase in the agency’s fee for collecting the Affordable Housing Levy from 0.5 percent to 2 percent, it significantly reduced the scope of new revenue-raising measures contained in the Bill.

If adopted by the House, the changes could lower the amount of additional revenue the government had expected to generate through the Finance Bill, even as it seeks resources to address a widening budget deficit.