The National Treasury has issued detailed clarifications on several tax proposals contained in the Finance Bill, 2026, following widespread public debate and media reports surrounding the proposed measures.
In a statement released on May 24, 2026, Cabinet Secretary for Treasury and National Planning John Mbadi said some public commentary had mixed provisions contained in the current Finance Bill with proposals from the withdrawn Finance Bill, 2024, resulting in misunderstandings about the government’s intentions.
The Treasury said it remains committed to public participation and stakeholder engagement throughout the legislative process while emphasising the need for accurate interpretation of the proposed tax measures.
Treasury Defends Proposed 25% Excise Duty on Mobile Phones
One of the most debated proposals in the Finance Bill, 2026, has been the planned 25 per cent excise duty on mobile phones, which critics have argued could negatively affect youth, digital access, and online livelihoods.
However, the Treasury clarified that the proposal does not introduce a new tax on mobile phones but instead seeks to simplify the current taxation structure.
According to the Treasury, mobile phones are currently subjected to multiple taxes and levies during importation and distribution, including:
- 16 per cent VAT
- 10 per cent excise duty
- 25 per cent import duty
- 2.5 per cent Import Declaration Fee
- 2 per cent Railway Development Levy
Combined, these taxes create an estimated cumulative tax burden of approximately 55.5 per cent.
Under the proposed framework, the government plans to replace the fragmented structure with a single 25 per cent excise duty to be collected upon activation of the device.
The Treasury stated that if the proposal is adopted, VAT, the Import Declaration Fee, Railway Development Levy, and the 25 per cent import duty on mobile phones would be removed, reducing the overall tax burden and simplifying tax administration.
The ministry acknowledged that mobile phones have become essential tools for communication, education, financial access, digital work, and entrepreneurship, explaining the strong public reaction to the proposal.
New Reporting Rules Proposed for Virtual Asset Transactions
The Finance Bill, 2026 also introduces a reporting framework for virtual asset transactions through amendments to the Tax Procedures Act.
The Treasury noted that traditional financial systems already operate within established accounting and reporting frameworks that help identify ownership and facilitate tax administration.
However, the rapid growth of digital and virtual asset transactions has created regulatory gaps due to the absence of clear reporting obligations.
According to the Treasury, the proposed framework seeks to align the taxation system with the evolving digital economy by introducing reporting and record-keeping requirements similar to those applied in conventional financial sectors.
Officials said the measures are intended to improve transparency, support tax administration, and strengthen the legal framework governing virtual assets.
Clarification on Digital Payment and Card Transaction Fees
The Treasury further clarified proposals relating to the taxation of fees charged on digital payment systems and card transaction services.
The Finance Bill seeks to address uncertainty surrounding the tax treatment of fees generated through mobile applications, payment platforms, software systems, and card payment networks.
According to the Treasury, the amendments are intended to distinguish between exempt traditional financial services and taxable technology-driven commercial services.
Officials said the proposals were also informed by recent court rulings relating to taxation of card transaction fees and digital payment platforms.
Treasury Denies Proposed 5 per cent Tax on Digital Content Monetisation
The National Treasury dismissed reports claiming that the Finance Bill, 2026, introduces a five per cent withholding tax on digital content monetisation.
The ministry clarified that no such proposal exists in the current Finance Bill and urged the public to distinguish between ongoing public discussions and the actual contents of the legislation before Parliament.
Treasury Separates Finance Bill 2026 from Withdrawn 2024 Proposals
The Treasury also emphasised that several controversial proposals associated with the withdrawn Finance Bill, 2024, are not included in the current Bill.
Among the excluded measures are:
- VAT on bread
- Motor vehicle circulation tax
- Access to mobile money transaction data
- The 2024 eco levy proposal on phones
Officials said confusion surrounding these earlier proposals has contributed to misinformation about the Finance Bill, 2026.
Clarification on Mpesa and Digital Transfer Taxation
The Treasury explained that proposals touching on digital payment systems are aimed at ICT-driven intermediary services rather than traditional financial services such as cash deposits, withdrawals, and foreign exchange transactions.
The ministry said the VAT Act currently exempts listed financial services but does not clearly address the tax treatment of digital intermediaries such as Payment Service Providers and technology platforms facilitating money transfers.
The Treasury further disclosed that it had held discussions with Safaricom and clarified that the company was not among the primary targets of the proposed measures.
New Withholding Tax Rules for Card Transactions
The Finance Bill also proposes amendments relating to withholding tax on card transaction fees involving services such as Visa cards.
According to the Treasury, recent court rulings established that interchange fees and payments made by banks to card companies do not currently qualify as management, professional, or royalty fees under existing tax law.
This has created what the government describes as a tax gap, where income generated from card payments remains outside the withholding tax framework.
To address this, the Finance Bill proposes expanding the legal definitions of management, professional, and royalty fees to include card-related transaction fees.
The Treasury said the changes are intended to improve clarity following judicial interpretation while enhancing revenue collection through expansion of the tax base.
Treasury Still Exploring PAYE Relief Measures
The Treasury also revealed that proposals to exempt the first KSh30,000 of employment income from taxation, effectively lowering PAYE obligations, are still under technical review and were not included in the Finance Bill, 2026.
Officials indicated that discussions on potential tax relief measures for salaried workers remain ongoing.
Treasury Calls for Constructive Public Participation
The National Treasury reaffirmed its commitment to maintaining a balanced fiscal framework that supports revenue mobilisation, economic growth, investment, innovation, and long-term economic sustainability.
John Mbadi Ng’ongo urged Kenyans to continue engaging constructively in the parliamentary review process of the Finance Bill, 2026, as debate over the proposed measures continues across the country.