The Finance Bill, 2026 has placed MPs in a difficult position as they balance Treasury revenue demands with growing voter frustration. Treasury argues the country faces a major financing gap and increasing debt obligations that require additional revenue measures.
The debate is unfolding against the backdrop of memories from the 2024 anti-tax protests.
The proposed legislation has once again thrust tax policy into the centre of national politics, with lawmakers preparing to examine a raft of revenue proposals at a time when many households continue to grapple with high living costs. The Bill has already drawn attention from civil society groups, opposition leaders and consumers who fear that any additional taxes could place further pressure on struggling families.
Its consideration also comes at a politically sensitive moment. Opposition groups are mobilising supporters ahead of events to mark the June 2024 protests that rocked the Kenya Kwanza administration and forced the government to abandon the Finance Bill, 2024 after widespread public resistance.
For Parliament, the debate presents a delicate balancing act. On one hand, lawmakers face pressure to support measures that will raise revenue for government operations. On the other, they must contend with public concerns over the impact of any new taxes on household budgets.
The government's push for additional revenue is driven by growing financial obligations and a widening gap between spending and expected income.
Treasury projections indicate that debt repayments in the next financial year will rise to Sh2.1 trillion, with interest payments alone accounting for Sh1 trillion. At the same time, the government plans to spend Sh4.3 trillion against projected revenues of Sh3.3 trillion, leaving a financing gap of nearly Sh1 trillion.
The burden of finding ways to bridge that gap now rests largely with Parliament as it considers the Finance Bill and other budget-related measures.
The National Treasury has also acknowledged that economic conditions remain challenging and has revised its growth projections downward by 0.5 percentage points.
According to Treasury data, inflation increased to 4.1 per cent in April 2025 from 3.7 per cent in April 2024, driven mainly by rising food and fuel prices.
“Additional pressure came from elevated food prices due to erratic weather patterns that affected agricultural output,” Treasury said in budget documents.
In an effort to cushion consumers, the government recently reduced VAT on fuel products from 16 per cent to eight per cent for a period of three months and continued subsidy programmes financed through the Petroleum Development Levy Fund.
Despite those interventions, many Kenyans continue to feel the effects of increased prices on essential goods and services.
Treasury Cabinet Secretary John Mbadi has moved to address concerns surrounding the Finance Bill, saying several issues being discussed publicly have either been misunderstood or confused with proposals contained in the withdrawn Finance Bill, 2024.
Speaking during a public forum at Jeevanjee Gardens in Nairobi, Mbadi said a number of controversial measures circulating online and in public discussions are not included in the current Bill.
The Treasury clarified that VAT on bread, the proposed motor vehicle circulation tax, access to mobile money transaction data and the eco levy on mobile phones are not part of the Finance Bill, 2026.
One of the proposals that has attracted considerable public attention is the planned two per cent excise duty on mobile phones.
According to Treasury, the proposal is intended to simplify the current tax structure rather than introduce a completely new charge.
Mbadi explained that mobile phones are presently subjected to several taxes and levies, including 16 per cent VAT, 20 per cent excise duty, 25 per cent import duty, Import Declaration Fees and Railway Development Levy. Together, these charges create an estimated tax burden of about 53.9 per cent.
Under the proposed changes, Treasury says some of those charges would be removed and replaced with a single two per cent excise duty charged upon activation of a mobile phone.
“The proposal was therefore primarily conceived as a tax simplification and rationalisation measure rather than the introduction of a new tax on digital access,” Mbadi said.
He noted that public reaction to the proposal reflects the increasingly important role mobile phones play in communication, education, financial inclusion and income generation, especially among young people.
The Treasury has also sought to clarify concerns regarding digital money transfers.
Mbadi said the Bill does not seek to impose taxes on traditional financial services such as deposits, withdrawals or foreign exchange transactions. Instead, it seeks to address the tax treatment of technology-driven digital intermediaries and payment platforms that currently operate in areas not fully covered by existing tax laws.
Even with those explanations, several proposals in the Bill continue to generate debate.
Among them is a proposed 25 per cent excise duty on plastic products, a five per cent levy on coal and plans to move several products from zero-rated to VAT-exempt status.
The affected products include solar batteries, electric bicycles, electric buses, motorcycles, as well as the transportation of sugarcane and animal feed inputs.
Economists have warned that such changes could eventually raise prices because businesses would no longer be able to claim certain input tax refunds and may pass the additional costs on to consumers.
As parliamentary debate begins, lawmakers are likely to weigh not only the economic implications of the proposals but also the political risks attached to supporting them.
Many MPs still remember the public backlash that followed the passage of the Finance Act, 2024, with some facing sharp criticism from constituents for backing tax measures that were widely opposed. With public sensitivity around taxation still high, the Finance Bill, 2025 is expected to test Parliament's ability to balance revenue needs with growing concerns over the cost of living.