By Benadeta Mwaura - Reporter
Kenya, May 13, 2026 - A new proposal under the Finance Bill 2026 could significantly expand the powers of the Kenya Revenue Authority, allowing it to freeze bank accounts and seize assets even before tax disputes are fully heard and determined.
The proposed amendment seeks to remove a key safeguard in the Tax Procedures Act that currently protects taxpayers from enforcement action once they have formally appealed a tax assessment.
If passed, the change would allow the taxman to proceed with recovery measures, through what are known as agency notices, regardless of whether a dispute is still ongoing.
An agency notice is a directive issued to third parties such as banks or employers, compelling them to remit funds held on behalf of a taxpayer directly to KRA to settle alleged tax arrears. Under the current law, such action is restricted once a taxpayer files an appeal.
However, the Finance Bill proposes to delete this protection, effectively giving KRA the green light to move against a taxpayer’s finances even as the case is being contested.
The proposed legal wording is explicit. “Section 42 of the Tax Procedures Act is amended… by deleting paragraph (e),” reads part of the Bill. That paragraph is what currently bars the Commissioner from issuing agency notices during an active appeal, meaning its removal would fundamentally alter how tax disputes are handled.
For businesses and individuals, the implications could be immediate and severe. A company disputing a tax assessment could find its bank accounts frozen, cutting off access to working capital and forcing it to seek loans to continue operating.
For individuals, salaries, savings, or even mobile money balances could be targeted before a final ruling is made.
Tax experts warn that this shift tilts the balance heavily in favour of the tax authority. It effectively treats disputed taxes as payable upfront, placing the burden on taxpayers to recover funds later if they win their case, often a lengthy and uncertain process.
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The proposal also risks reigniting long-standing tensions between taxpayers and the KRA over aggressive enforcement tactics.
In fact, recent court rulings have already questioned such approaches, with the High Court blocking attempts by the tax authority to directly access bank accounts in certain cases, citing due process concerns.
Critics argue that the amendment could open the door to abuse, particularly in cases where tax assessments are later found to be incorrect. Delays in refunding wrongly collected funds could further strain businesses already operating under tight cash flow conditions.
“For businesspeople, the issue is that you are pulling cash out of my business,” one tax expert noted, questioning why firms should be forced to borrow to survive disputes that are yet to be resolved.
The proposal is not entirely new. The Treasury has attempted several times to introduce similar provisions, including earlier versions that required taxpayers to pay a portion of disputed taxes before lodging an appeal.
While those attempts were rejected, the reintroduction of the clause signals a continued push by the government to tighten revenue collection.
At its core, the move reflects mounting fiscal pressure on the state, which is seeking to close revenue gaps and improve tax compliance amid rising debt obligations. However, it also raises fundamental questions about fairness, due process, and the balance of power between the tax authority and citizens.
If passed in its current form, the amendment would mark a major shift in Kenya’s tax enforcement landscape, one where disputes no longer shield taxpayers from immediate financial consequences, and where the cost of contesting a tax bill could rise significantly.