By James Murimi - Reporter
Kenya, 16 June 2026 - Parliament has handed consumers, businesses and investors a major victory after rejecting a controversial proposal that would have shifted excise duty on mobile phones from the point of importation to the point of activation on mobile networks.
In a move expected to save consumers from potential price uncertainty and spare businesses from new compliance hurdles, the National Assembly's Departmental Committee on Finance and National Planning recommended that the proposal be deleted from the Finance Bill 2026.
The committee said the proposal, which was among the most closely watched tax measures in the Bill, would create "significant compliance challenges, delay revenue collection, and create uncertainty for consumers."
"The Committee therefore recommended that the proposal be deleted, noting that further policy review and stakeholder consultation would be required before implementation," the report states.
The decision emerged as lawmakers completed scrutiny of the Finance Bill 2026 and proposed sweeping amendments aimed at balancing the government's revenue targets with the need to protect economic growth and business competitiveness.
Committee chairperson and Molo MP Kuria Kimani said the review process sought to strike a delicate balance between raising revenue and safeguarding taxpayers and investors.
"Throughout this process, the Committee was guided by the need to balance revenue mobilisation through administrative reforms with the imperative to support economic recovery, safeguard taxpayers' rights and promote sustainable growth," states the report signed by Kimani.
The committee also delivered another significant win to manufacturers after rejecting Treasury proposals to remove zero-rated tax incentives on locally assembled mobile phones, electric motorcycles, electric bicycles, solar batteries, lithium-ion batteries and electric buses.
Lawmakers warned that reversing the incentives would hurt local industries that have benefited from tax support introduced in recent years.
"The Committee observed that these items were recently granted zero-rated status under the Finance Act, 2023 to support local manufacturing and reduce the cost of essential goods," the report says.
It adds: "Reversing this position would increase production costs, discourage investment, and undermine predictability in the tax system."
The committee further softened another contentious proposal that would have compelled companies to distribute at least 60%of undistributed profits as dividends.
According to lawmakers, such a requirement would have restricted businesses from retaining earnings for expansion and investment.
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"The Committee recommended an amendment of the proposed threshold, noting that such a requirement would place undue pressure on businesses and limit their ability to retain earnings for investment and growth," the report notes.
Businesses also received relief after lawmakers rejected plans to give the Kenya Revenue Authority (KRA) sweeping powers to recover disputed taxes even when objections, appeals or court cases are still pending.
The committee cautioned that the proposal would undermine taxpayer rights and potentially cripple businesses through premature recoveries.
"The Committee noted that such a measure could result in significant cash flow constraints and operational disruptions for taxpayers, particularly where amounts recovered are later found not to be payable," lawmakers said.
At the same time, MPs backed a fresh tax amnesty programme targeting outstanding tax arrears accumulated up to 31December 2025.
The committee argued that the initiative could unlock billions of shillings in revenue while encouraging voluntary compliance.
According to the report, the previous amnesty programme attracted more than 1.06 million applications and resulted in the declaration of KSh 54.5 billion in principal tax liabilities and the collection of KSh 43.9 billion between September 2023 and June 2024.
"The Committee supported the proposal, noting that significant outstanding tax arrears remain unresolved due to compliance gaps, disputes, and administrative constraints," the report states.
The Finance Bill 2026 is expected to generate approximately KSh98.9 billion in additional revenue through enhanced compliance and administrative reforms rather than through major tax increases.
With debate on the Bill expected in the National Assembly, the committee's recommendations are likely to be welcomed by manufacturers, investors and consumers who had expressed fears that some of the original proposals would raise operating costs and slow economic activity.