Former Law Society of Kenya (LSK) President Faith Odhiambo has raised concerns over the proposed Finance Bill, 2026, warning that several of its tax measures could increase the financial burden on households, small businesses, and investors if not carefully reviewed by Parliament.
In a statement, Odhiambo noted that the Finance Bill, 2026, which was gazetted on April 30 and is currently before Parliament, seeks to raise sh3.63 trillion in revenue in the 2026/27 financial year.
Odhiambo further highlighted that the budget deficit is projected to widen to 5.3 per cent of GDP, up from 4.7 per cent in 2025/26, saying that while the fiscal targets may be achievable, the distribution of the tax burden raises concern.
She pointed to several proposed tax measures, including changes to income tax filing timelines, taxation of mitumba imports, adjustments to rental income tax, and reforms affecting digital financial services. Odhiambo warned that these could increase compliance costs and place additional pressure on households and businesses.
“Such measures risk placing additional pressure on already strained households and enterprises operating in a challenging economic environment,” she said, particularly affecting small traders and low-income earners who rely on informal trade and digital platforms.
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Odhiambo also raised concerns over proposed changes affecting investment income and corporate tax structures. She specifically criticised an amendment to Section 24 of the Income Tax Act, which would allow the Kenya Revenue Authority (KRA) to deem at least 60 per cent of a company’s undistributed income as dividends for tax purposes.
“This fails to account for legitimate decisions on reinvestment, working capital and business growth. It is a retrogressive measure that sends the wrong signal to the investors Kenya needs,” she said.
On the Pay As You Earn (PAYE) framework, Odhiambo said there was disappointment over the absence of expected tax relief measures. “Kenyans were led to expect relief and restructuring of tax bands to ease the burden on salaried workers. That proposal does not appear in this Bill. An explanation is owed to every employed Kenyan who was waiting for it,” she said.
She further cautioned that proposed changes to taxation of financial transactions and digital payment services could undermine financial inclusion by increasing the cost of essential financial tools used by millions of Kenyans.
Despite her concerns, Odhiambo acknowledged that the Bill contains some positive measures, including tax amnesty extensions and targeted VAT exemptions on selected goods and services, saying they could ease pressure in key sectors if properly implemented.
However, she urged Parliament to exercise strong oversight during its consideration of the Bill. “Be that as it may, we cannot afford a repeat of June 2024. Parliament must discharge its oversight role with the seriousness this moment demands. Every clause must be scrutinised,” she said.
