Finance Bill 2026 Draws Backlash Over Digital and Startup Taxes
NAIROBI, Kenya — Business groups, tax experts, and industry players have raised concerns over several proposals in the Finance Bill 2026, warning that some measures could increase the cost of doing business, discourage investment, and slow the growth of Kenya’s digital economy.
The concerns emerged as the National Assembly’s Finance and Planning Committee reviews submissions received during public participation on the bill ahead of parliamentary debate.
Critics argue that while the government aims to increase revenue collection and expand the tax base, some of the proposed measures could place additional pressure on businesses and consumers.
Concerns Over Digital Tax Measures
One of the most contested proposals involves taxation linked to digital payment systems and related services.
The Consumers Federation of Kenya (COFEK) said the bill expands definitions of “royalty” and “management fee” in a way that could subject digital payment platforms and card networks to additional withholding taxes.
COFEK warned that the costs could eventually be passed on to consumers and businesses through higher transaction charges.
“This is a hidden tax with no transparency mechanism,” the lobby group said in its submission to Parliament.
Treasury Cabinet Secretary John Mbadi, however, denied claims that the government intends to introduce new charges on domestic mobile money transfers such as M-Pesa transactions.
Speaking on May 26, Mbadi said the measures are aimed at foreign-owned card service providers that generate income from the Kenyan market without paying sufficient local taxes.
“We are not introducing any extra charges that are going to affect money transfer through M-Pesa,” Mbadi said.
Tax advisory firms PwC and KPMG cautioned that higher taxes on merchant service and interchange fees could increase the cost of cashless transactions and affect financial inclusion gains made in recent years.
Startup Ecosystem Raises Alarm
The Finance Bill 2026 also proposes a 15 percent capital gains tax on indirect transfers involving Kenyan assets.
Industry stakeholders say the proposal could affect venture capital and private equity transactions involving Kenyan startups, especially where investments are structured through offshore holding companies.
Technology investors and startup founders have warned that the measure could reduce Kenya’s competitiveness as a regional investment hub.
Kenya has in recent years attracted significant funding in sectors such as fintech, logistics, and health technology.
Some blockchain and virtual asset companies have also expressed concern over proposed licensing and tax requirements, arguing that unclear regulations could disadvantage local startups.
Kotani CEO Felix Macharia called for what he termed “balanced regulation” to avoid creating barriers for smaller firms.
Mitumba Traders and Small Businesses
The proposed law has also drawn criticism from traders in the second-hand clothing sector.
Under the bill, profits for mitumba traders would be deemed at five percent of the customs value of imported goods and payable before the goods are released by the Kenya Revenue Authority.
Former Law Society of Kenya President Faith Odhiambo criticized the proposal, arguing that traders could be forced to pay taxes regardless of whether they make profits or losses.
The bill also proposes moving the income tax filing deadline from June 30 to April 30.
While the government says the move would align Kenya with international standards, critics argue that it could increase compliance costs for small businesses and individual taxpayers.
Debate Ahead of Parliamentary Vote
Tax experts say the Finance Bill 2026 focuses heavily on revenue collection while offering limited incentives to stimulate manufacturing, investment, and job creation.
KPMG Associate Director Kiema Onesmus said the bill lacked sufficient measures to support economic growth.
PwC also noted that many salaried workers had expected reforms to PAYE tax bands to help ease pressure from the rising cost of living.
The Treasury maintains that the proposed measures are necessary to improve revenue collection and strengthen tax compliance.
Parliament is expected to continue debating the bill in the coming days before lawmakers vote on the final proposals.