Kenya's Parliament approved the Finance Bill 2026 with significant amendments, expecting to raise $763 million in new revenue. This amount is substantially lower than the approximately $985 million (Ksh 120 billion) initially sought by President William Ruto's administration. The bill now projects to collect about $810 million (Ksh 98.5 billion) from the revised proposals, a reduction attributed to lawmakers' response to public sentiment and protests against several aggressive tax measures.
Key changes include the removal of a 25% excise duty on activated mobile phones and the retention of zero-rated VAT status for several products previously slated for reclassification. Lawmakers also rejected proposals that would have expanded the Kenya Revenue Authority's (KRA) powers, such as issuing notices against taxpayers during ongoing appeals and including weekends in tax objection timelines. However, members of Parliament did not agree to lower the Pay As You Earn (PAYE) marginal tax rate from 35% or increase the tax-free threshold from $200 (Ksh 24,000) to $250 (Ksh 30,000) per month, despite pressure from financial experts.
Among the approved measures is the reintroduction of a tax amnesty program, effective July 1, 2026. This initiative will waive penalties and interest for taxpayers who settle outstanding principal tax liabilities accrued up to December 31, 2025, by June 2027. This decision follows the success of a previous amnesty that attracted over one million applicants and collected billions of shillings. Lawmakers also supported measures to tax non-resident landlords, exempt death benefits for pension beneficiaries, and formalize taxation in the scrap metal sector with a 1.5% withholding tax. The KRA is tasked with collecting nearly $24.7 billion (Sh3 trillion) in the upcoming fiscal year, and while Parliament aims for increased revenue, it has also sought to protect taxpayer rights.
