Kenya’s government is defending sweeping tax proposals targeting the country’s rapidly expanding digital economy, arguing that sectors such as mobile phone trade, virtual assets, and international payment platforms can no longer remain lightly regulated while pressure on public finances continues to mount.
Treasury Cabinet Secretary John Mbadi has pushed back against criticism surrounding the Finance Bill 2026, insisting that many of the proposals have been misunderstood. According to the Treasury, the goal is not to introduce punitive taxes, but rather to simplify taxation, close revenue leakages, and modernize Kenya’s tax framework to reflect the realities of a digital-first economy.
The debate comes at a politically sensitive time following the fallout from the rejected Finance Bill 2024, which triggered nationwide protests and forced the government to rethink its tax strategy. This time, Treasury appears focused on repositioning the conversation around fairness, efficiency, and compliance instead of aggressive tax expansion.
The Proposed Mobile Phone Tax Changes Explained
One of the most controversial proposals in the Finance Bill 2026 involves changes to how mobile phones are taxed in Kenya.
Critics initially interpreted the proposal as a fresh tax burden targeting young Kenyans, digital entrepreneurs, and small traders who rely heavily on smartphones for business, communication, education, and mobile banking. However, Treasury officials insist the proposal is primarily designed to simplify an already complicated tax structure.
Currently, imported smartphones in Kenya attract multiple layers of taxation, including:
- 16% Value Added Tax (VAT)
- 10% excise duty
- 25% import duty
- 2.5% import declaration fee
- 2% railway development levy
- Additional VAT charges within the supply chain
Under the proposed system, many of these charges would be consolidated into a single 25% excise duty payable only after the device is activated by the final consumer.
According to Mbadi, this shift could significantly improve cash flow for mobile phone traders, who currently pay substantial taxes upfront before selling devices. The Treasury also argues that the move would streamline tax administration, reduce complexity, and potentially lower the overall tax burden within the supply chain.
For businesses operating in Kenya’s fast-growing digital and retail economy, these changes could reshape pricing models, inventory financing, and import planning.
Kenya Expands Oversight of Virtual Assets and Digital Payments
The Finance Bill 2026 also signals Kenya’s growing focus on regulating virtual assets and digital financial services.
Under the proposed amendments to the Tax Procedures Act, virtual asset service providers — including cryptocurrency exchanges and digital asset platforms — would face new reporting and record-keeping obligations similar to those already applied to traditional financial institutions.
The government argues that crypto-related transactions have expanded rapidly outside formal tax systems, creating gaps in oversight and reducing potential tax revenue.
Importantly, Kenya is not proposing a ban on cryptocurrency or digital assets. Instead, the Treasury is seeking to formalize the sector by:
- Increasing transaction transparency
- Expanding reporting obligations
- Improving compliance monitoring
- Aligning digital assets with existing financial regulations
This mirrors a broader global trend as governments worldwide move to integrate digital assets into mainstream tax and regulatory frameworks.
Visa, Mastercard, and International Payment Platforms in Focus
Another major proposal targets fees earned by international card payment providers such as Visa Inc. and Mastercard.
The Treasury wants to clarify the tax treatment of interchange fees and payment-processing charges paid by Kenyan banks to foreign payment platforms after recent court rulings limited the Kenya Revenue Authority’s ability to tax such income.
Under the Finance Bill, these fees would attract a 0.01% withholding tax. While relatively small, Treasury officials describe the measure as an important compliance and visibility mechanism that ensures foreign firms benefiting from Kenya’s financial ecosystem contribute to the local tax base.
At the same time, Treasury clarified that mobile money providers such as Safaricom PLC and Airtel Money are not the intended targets of these proposals because they own and operate their payment infrastructure directly.
The clarification appears aimed at calming public fears about potential taxes on mobile money transfers, which remain central to Kenya’s economy and everyday commerce.
What Businesses Should Prepare For
The Finance Bill 2026 highlights Kenya’s broader shift toward taxing and regulating digital commerce more aggressively as the government searches for sustainable revenue sources without triggering another political backlash.
For businesses, the proposed changes could have major implications for:
- Import taxation
- Digital transactions
- E-commerce operations
- Payment processing costs
- Cryptocurrency compliance
- Retail pricing strategies
- Financial reporting obligations
As Kenya’s tax environment becomes more complex, businesses will increasingly need professional support in areas such as:
- Tax planning
- Regulatory compliance
- Financial structuring
- Digital business advisory
- Risk management
- Supply chain optimization
At Janta Kenya, businesses can access expert advisory services to help navigate evolving tax laws, digital economy regulations, and operational restructuring in Kenya’s rapidly changing business environment.
The Finance Bill 2026 ultimately reflects a deeper economic reality: as digital commerce grows, governments are moving quickly to ensure taxation and regulation evolve alongside it.
