The Kenyan government has defended planned tax reforms targeting the country’s rapidly expanding digital economy, arguing that mobile phone dealers, international payment firms and virtual asset operators should contribute more fairly to an overstretched tax system.
Treasury Cabinet Secretary John Mbadi dismissed criticism surrounding the Finance Bill 2026, saying several proposals had been misunderstood and insisting the reforms are aimed at promoting “fairness, equity and simplicity” rather than introducing harsh new taxes.
The reforms come as President William Ruto’s administration attempts to broaden the tax base after the political backlash caused by the rejected Finance Bill 2024, which triggered nationwide protests and forced the government to withdraw several proposals.
Unlike the previous bill, the Treasury says the latest approach is focused less on creating new taxes and more on sealing loopholes in fast-growing digital sectors that have outpaced regulation.
One of the most contentious proposals concerns mobile phones, with critics portraying it as a new tax burden aimed at young people and digital entrepreneurs. Mbadi rejected those claims, arguing that phones are already subjected to multiple taxes during importation and distribution.
According to the Treasury, imported handsets currently attract 16% VAT, 10% excise duty, 25% import duty, a 2.5% import declaration fee and a 2% railway development levy, before additional VAT is added further along the supply chain.
Under the proposed system, most of those charges would be consolidated into a single 25% excise duty payable only after a phone is activated by the buyer.
Mbadi said the change is designed to ease cash flow pressures on traders who currently pay taxes before devices are sold, while also simplifying compliance and potentially reducing the overall tax burden.
“The proposal was primarily conceived as a tax simplification and rationalisation measure,” Mbadi said, rejecting accusations that the government intended to tax access to digital services.
The proposal arrives at a sensitive time, particularly in Kenya where smartphones are central to employment, banking, education and online business, especially among young people.
The Finance Bill 2026 also introduces stricter oversight of virtual assets by requiring cryptocurrency service providers to report transactions under amendments to the Tax Procedures Act.
Mbadi argued that cryptocurrency and other digital asset transactions have grown outside existing reporting systems used in traditional finance, creating what he termed a legal loophole.
Rather than banning virtual assets, the government wants exchanges and related firms to maintain records and disclose transactions similarly to conventional financial institutions.
The move mirrors a wider global trend as governments increasingly seek to regulate and tax cryptocurrency activity amid concerns over hidden capital flows and lost revenue.
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The Treasury also defended plans targeting fees earned through international payment systems such as Visa Inc. and Mastercard.
Mbadi said the government aims to clarify the tax treatment of interchange and digital processing fees paid by Kenyan banks to foreign platform providers after court decisions limited the Kenya Revenue Authority’s ability to tax that income.
The Treasury argues that overseas firms benefiting from Kenya’s financial infrastructure should also contribute to the country’s tax revenues.
The proposed withholding tax on card transaction fees would stand at 0.01%, which Mbadi described as mainly a compliance and visibility measure for local entities while serving as a final tax for offshore companies.
At the same time, the Treasury attempted to ease fears around mobile money taxation. Mbadi clarified that companies such as Safaricom PLC and Airtel Money are not the primary targets because they directly own and operate their payment platforms.
The clarification appears intended to avoid renewed public anger over perceived taxation of mobile money transactions, which remain central to Kenya’s daily economic activity.
Mbadi also dismissed claims that the Finance Bill 2026 introduces a 5% withholding tax on digital content creators, saying the issue had been wrongly linked to debates from the abandoned Finance Bill 2024.
He further denied reports suggesting the bill proposes taxes on freehold and leasehold land, VAT on bread, motor vehicle circulation levies or access to mobile money transaction data.
Overall, the Treasury has framed the Finance Bill 2026 as a technical attempt to modernise tax administration rather than a politically motivated revenue drive.
