A new push by the National Treasury to allow tax authorities to continue collecting disputed taxes unless a court grants a stay order has set off strong resistance from business leaders and tax experts, who say the plan could place heavy pressure on firms already engaged in tax appeals and weaken fairness in tax enforcement.
Treasury Cabinet Secretary John Mbadi introduced the proposal during the 2026/27 Budget Statement delivered on Thursday, framing it as part of wider reforms aimed at improving tax administration and strengthening compliance.
“To improve efficiency in tax administration, Finance Bill 2026 is proposing to allow tax assessments to be issued based on information lawfully available to the Commissioner. To further align enforcement of tax compliance, the Bill is proposing to amend the Tax Procedures Act to clarify that enforcement of tax collection when a judgment is in favour of the Commissioner shall only be suspended where a stay order has been granted,” Mbadi said in his 2026/27 budget speech on Thursday.
The plan builds on earlier changes contained in Finance Bill 2026, where the government had proposed scrapping Section 42 (14)(e) of the Tax Procedures Act. The section currently blocks KRA from attaching taxpayer accounts where an appeal has been filed against a tax assessment.
Private sector players now argue that the latest direction could tilt the system too far in favour of enforcement, leaving businesses exposed to immediate recovery actions even while disputes are still ongoing in court or tribunal processes.
Concerns are also rising over the broader economic timing of the proposal, coming at a moment when the government is projecting higher revenue collection targets. For the financial year beginning July 1, 2026, the State expects to raise Sh3.63 trillion in total revenue, with Sh2.98 trillion coming from ordinary revenue sources such as income tax and value added tax.
Tax experts say the pressure to meet these targets could influence how enforcement powers are applied if the proposed law is passed.
The latest move adds to a series of similar attempts in recent years aimed at tightening tax collection powers.
In Finance Bill 2022, the government proposed requiring taxpayers to deposit 50.0 per cent of disputed tax before filing an appeal. The proposal was not passed. Finance Bill 2024 later suggested a 20.0 per cent deposit requirement, which also failed to go through.
Finance Bill 2025 further proposed allowing KRA to issue agency notices and attach bank accounts even when a taxpayer had already lodged an appeal, but the plan did not succeed.
With the new proposal now back on the table, debate has reopened over how to balance revenue collection needs with protections for taxpayers involved in active disputes, as businesses warn of potential strain on cashflows and investment stability.