Finance Committee Moves to Scrap Controversial Phone Tax as MPs Back Major Changes to Finance Bill 2026
Kenyans could be spared from paying a controversial new levy on mobile phones after the National Assembly’s Finance and National Planning Committee recommended the removal of several disputed tax proposals contained in the Finance Bill 2026.
In a report tabled before Parliament on Tuesday, June 16, lawmakers proposed sweeping amendments to the Bill following intense public opposition from consumers, businesses, industry players, and tax experts who argued that some of the proposed measures would increase the cost of living and stifle economic growth.
Among the most significant recommendations is the deletion of a proposal that sought to introduce a 25 per cent excise duty on every mobile phone activated in Kenya.
The committee said the proposed tax would have posed serious implementation challenges while creating uncertainty in the telecommunications sector.
According to the report, the proposed levy “would create compliance challenges, delay revenue collection and create uncertainty for consumers,” prompting lawmakers to recommend that the clause be dropped entirely.
The move comes as a major relief to millions of Kenyans who rely on mobile phones for communication, mobile banking, business transactions, and access to government services.
Businesses Handed Lifeline
The committee also moved to shield key sectors of the economy from increased taxation by recommending the retention of zero-rated VAT status on several products that the Finance Bill had proposed to reclassify as VAT-exempt.
The affected products include locally assembled electric motorcycles, electric buses, solar batteries, lithium-ion batteries, transportation of sugarcane to factories, and raw materials used in the manufacture of animal feeds.
Lawmakers warned that removing the tax incentives would have far-reaching consequences for local industries.
“The proposed changes would increase production costs, discourage investment and undermine local manufacturing efforts,” the committee noted in its report.
Industry stakeholders had earlier raised concerns that the proposed amendments would make locally manufactured products more expensive and reduce Kenya’s competitiveness in emerging sectors such as electric mobility and renewable energy.
KRA Powers Curtailed
In another major victory for taxpayers, the committee rejected a proposal that would have granted the Kenya Revenue Authority (KRA) powers to issue enforcement notices against taxpayers even when disputes were still under appeal or before the courts.
The lawmakers argued that such powers could undermine constitutional protections and expose businesses to unfair treatment.
“The proposal may undermine taxpayers’ rights, disrupt business operations and compromise access to justice,” the committee stated.
The committee further opposed a proposal to include weekends and public holidays when calculating timelines for filing tax objections and appeals.
Members warned that such a move could unfairly disadvantage taxpayers and violate principles of procedural fairness and due process.
Tax Amnesty Returns
Despite rejecting several controversial tax measures, lawmakers endorsed a number of revenue-enhancing proposals aimed at boosting tax compliance and increasing government collections.
Among the proposals backed by the committee is the reintroduction of a tax amnesty programme set to take effect from July 1, 2026.
Under the programme, taxpayers with outstanding principal tax liabilities accumulated up to December 31, 2025, would be allowed to regularise their tax affairs without facing penalties and interest.
The committee cited the success of a previous amnesty initiative, which attracted more than one million applications and generated billions of shillings in revenue for the government.
“The tax amnesty programme proved effective in encouraging voluntary compliance and enhancing revenue collection,” lawmakers observed.
Other Measures Supported
The committee also supported proposed amendments to tax return filing timelines, changes targeting taxation of non-resident landlords, and provisions exempting death benefits paid to pension beneficiaries from taxation.
Additionally, lawmakers endorsed plans to formalise taxation within the scrap metal industry through the introduction of a 1.5 per cent withholding tax.
The recommendations now set the stage for a heated debate in Parliament as MPs consider the final version of the Finance Bill 2026, with Kenyans keenly watching whether lawmakers will uphold the committee’s proposals or reinstate some of the contentious tax measures.
If adopted by the National Assembly, the changes would mark a significant shift from the Treasury’s original proposals and provide relief to consumers and businesses grappling with rising economic pressures.
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