The National Assembly of Kenya has invited members of the public and stakeholders to submit views on the proposed Finance Bill 2026 as lawmakers begin scrutiny of sweeping tax reforms expected to affect several sectors of the economy.
The Bill, currently before the Departmental Committee on Finance and National Planning, proposes amendments to key tax laws, including the Income Tax Act, Value Added Tax Act, Excise Duty Act and the Tax Procedures Act, in a bid to broaden the tax base and increase government revenue.
Among the most contentious proposals is a 25 per cent excise duty on mobile phones, a move that could significantly raise smartphone prices and increase the cost of digital access for millions of Kenyans.
The Bill also proposes new taxes targeting digital financial services and seeks to remove a withholding tax exemption currently enjoyed by Kenya Airways on payments to foreign aviation service providers.
The National Treasury is targeting an additional Sh120 billion in revenue through the proposed reforms as part of efforts to support the 2026/27 financial year budget. Total tax collections are projected to reach Sh2.985 trillion from July.
Smartphone tax sparks concern
Under proposed amendments to the Excise Duty Act, mobile phones for cellular and wireless networks would attract a 25 per cent excise duty payable at the point of activation rather than at importation or purchase.
If passed, the measure is expected to raise retail prices for smartphones and other wireless devices at a time when the government is increasingly digitising public services, education, banking and business operations.
For example, a smartphone retailing at around Sh10,000 could cost more than Sh12,500 before accounting for existing VAT, import duties and dealer mark-ups.
The proposal has sparked concerns among consumer groups and digital rights advocates, who warn that higher device costs could deepen the digital divide, particularly for low-income earners, young people and rural households.
Smartphones have increasingly become essential tools for informal workers and small businesses. Boda boda riders use mobile applications for navigation and customer requests, traders rely on phones for mobile banking and stock management, while online workers depend on affordable internet-enabled devices for digital jobs and marketplaces.
Kenya’s mobile money ecosystem and high mobile penetration have long been regarded as key drivers of economic growth and financial inclusion. Critics argue that increasing smartphone costs may undermine government efforts to expand access to platforms such as eCitizen, online tax filing and digital payments.
Compliance and implementation concerns
Unlike previous taxation models, the proposed excise duty would be collected when a device is first activated on a mobile network.
Treasury officials argue that the approach is intended to seal tax loopholes and improve enforcement by ensuring all active devices are captured within the tax system.
However, the proposal has raised questions over implementation, including who would be responsible for remitting the tax — telecom operators, distributors or importers.
Consumers who import refurbished or second-hand devices have also expressed concern over how the levy would be applied.
The proposed smartphone tax comes even as the Finance Bill includes incentives aimed at encouraging green technologies, including electric bicycles and buses, a contrast that has fuelled criticism over what some observers describe as conflicting policy priorities.
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