Finance Bill 2026: Ogada outlines duty-free phone inputs and 25% activation charge

Kenya's proposed Finance Bill 2026 has sparked fresh debate over the cost of imported goods and digital devices, with Economic Justice Expert at the Institute for Social Accountability Tom Ogada warning that the changes could reshape how mobile phones, Mitumba clothing and lottery winnings are taxed.

Speaking during a Radio Generation interview on Friday, Ogada outlined key provisions in the Bill, including a proposed 25 per cent excise duty on mobile phones at the point of activation, tax changes affecting imported goods and a higher tax on lottery winnings.

The expert said discussions around Mitumba imports remain a major part of the debate on the proposed tax measures, noting that there have been different interpretations about the extent to which the sector will be affected.

According to Ogada, the Finance Bill appears to place imported goods under a broader taxation framework, creating an environment where imported Mitumba clothing is treated in a similar way to other foreign products entering the country.

His remarks came a day after Treasury Cabinet Secretary John Mbadi unveiled proposals that would restructure taxes on imports and digital devices.

https://twitter.com/RadioGenKe/status/2065312406926983523

Under the proposed changes, Mitumba imports would face tighter classification under revised customs duty measures as the government seeks to streamline the taxation of imported products.

Mobile phones have emerged as one of the most closely watched aspects of the Bill. Ogada explained that several charges currently imposed on imported phones, including import duty, VAT and excise duty, would effectively be replaced by a single 25 per cent excise duty charged when a device is activated.

At the same time, the Bill proposes duty-free importation of inputs used in the local assembly of smartphones, computers, smart watches and other digital devices in a move aimed at encouraging local manufacturing.

Ogada said the proposed activation tax has generated considerable discussion because it shifts tax collection from border points to the stage when a device is put into use.

“There is that 25% excess duty on mobile phones charged at the point of activation. So when I switch that phone on and they put a SIM card, now 25% is activated,” he explained.

He noted that the proposed system relies on SIM card registration and device identification technologies to support tax administration.

According to Ogada, Kenya's existing SIM registration framework allows authorities to connect users to specific devices through International Mobile Equipment Identity (IMEI) numbers.

“The first thing that will happen right now is that the government will know the kind of phone that you have. They can know that this person has a phone worth Sh100,000 or Sh180,000,” he noted.

The expert further observed that imported products, including Mitumba clothing, could ultimately attract additional costs once taxes are applied at entry points.

A key feature of the Bill, he added, is the decision to exempt inputs used in assembling smart devices from import duties. He said the measure is intended to lower production costs for local assemblers while supporting domestic manufacturing.

However, he maintained that the separate 25 per cent excise duty on activated mobile phones introduces a new tax component that consumers will closely watch as debate on the Bill continues.

The proposed legislation also introduces changes to consumption taxes, including an increase in withholding tax on lottery and prize competition winnings from 5 per cent to 20 per cent.

Ogada explained that the tax would continue to be deducted before winners receive their payouts, reducing the amount ultimately collected by successful participants.

“If you get to win 1000 shillings, your actual winning after tax is 800 shillings because 20% withholding tax has been taken from the winnings,” he explained.

He also pointed to broader fiscal trends, noting that domestic borrowing has risen beyond Sh1 trillion as the government seeks to finance its spending needs.

Ogada concluded that the proposed changes on imported goods, mobile phone activation and consumption taxes reflect a wider shift in the country's taxation approach, with implications for consumers, importers and users of digital devices.