The proposed Finance Bill 2026 is introducing major tax changes targeting Kenya’s second-hand clothes market and the mobile phone sector, with the government defending the measures as part of efforts to simplify tax collection and seal revenue leakages.
The proposals, however, are already raising concerns among consumers, traders and digital rights advocates over the possible impact on the cost of living and access to technology.
5% Presumptive Tax on Mitumba Imports
One of the most closely watched proposals is the introduction of a presumptive tax regime on mitumba imports.
The government says the new framework seeks to replace what it describes as a fragmented and unpredictable tax structure with a simplified system applied at the point of importation. Under the proposal, imported mitumba goods would first attract the standard 16% VAT at entry.
Authorities would then assume a 5% profit margin on the sale of the imported goods, with that presumed profit subjected to a one-off income tax of 30%. Once paid, traders would not face additional taxes on the same goods.
According to the Bill, the shift is intended to reduce multiple taxation points, ease compliance and improve predictability for traders.
The government also argues that the model emerged from consultations with mitumba traders who preferred taxation at clearly defined stages rather than multiple enforcement points along the supply chain.
Officials say the system is also designed to address widespread under-declaration by some high-volume importers who reported little or no taxable income despite large-scale operations.
25% Excise Duty on Mobile Phones
The Finance Bill also proposes a 25% excise duty on mobile phones, a move likely to increase smartphone prices at a time when Kenya is pushing digital inclusion and e-government adoption.
The government says the tax would be charged at the point of device activation, allowing authorities to capture all phones entering active use within the tax system.
According to the Treasury’s explanation, this approach is intended to strengthen enforcement, improve fairness in digital economy taxation and support national revenue mobilisation.
The proposal aligns with a broader policy shift in the Finance Bill away from withholding taxes toward a final presumptive tax model where obligations are settled upfront with no additional filings required.
The proposals are expected to face intense public scrutiny as Parliament begins public participation hearings on the Finance Bill and Budget Estimates for the 2026/27 financial year.
Read: Finance Bill 2026: What Kenyans Should Expect From New Finance Law
>>> National Assembly Invites Public Views on 2026/27 Budget Estimates
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