Kenya's National Assembly has approved the Finance Bill 2026, but only after its Finance and National Planning Committee introduced amendments that will reduce the projected revenue significantly. The initial target was to raise an additional KSh 120 billion ($891 million) in revenue. However, due to the committee's revisions, the expected additional revenue will now be KSh 98.5 billion ($763 million).
The amendments reflect a pushback against the government's aggressive tax proposals, possibly influenced by public sentiment and "Gen Z-led protests of 2024." Lawmakers rejected several of the Treasury's measures, signaling a departure from President William Ruto’s administration's initial plans. This move means the government may need to increase borrowing to finance its KSh 4.82 trillion budget for the 2026/2027 fiscal year.
Despite pressure from financial experts, the committee declined to alter the current Pay As You Earn (PAYE) structure by lowering the highest marginal tax rate from 35% to 28-30%. Proposals from groups like the Institute of Certified Public Accountants of Kenya (ICPAK) to exempt individuals earning less than KSh 30,000 per month from PAYE, extending the tax-free threshold from KSh 24,000, were also not adopted. The committee stated that the Treasury is still exploring ways to make the personal income tax system more progressive without drastically cutting government revenue.
Furthermore, Parliament rejected proposals that would have expanded the Kenya Revenue Authority's (KRA) powers. These included blocking the KRA from attaching taxpayers' bank accounts while an appeal is pending and rejecting mandatory stay orders before taxpayers could gain protection against enforcement actions. Lawmakers also dismissed a proposal to include weekends and public holidays in calculating statutory timelines for objections and appeals. While limiting the KRA's enforcement powers, Parliament did approve measures strengthening the KRA's role in collecting money owed to government entities.
The Finance Bill 2026, which aims to amend key tax laws like the Income Tax Act, Value Added Tax Act, and Excise Duty Act, now awaits President William Ruto's assent to become law. The passage of the bill, with 122 votes in favor and 40 against, marks a compromise that seeks to balance government revenue needs with taxpayer protections and public concerns.
