The National Treasury on Saturday, May 9, responded to former Law Society of Kenya President Faith Odhiambo over eight concerns she raised about the Finance Bill 2026.  

Odhiambo questioned new policies, including tax on mitumba imports, excise duty on mobile phones, and failing to address the high Pay as You Earn (PAYE) Tax, among others.  

The former LSK President questioned why the Treasury had reneged on its promise to cushion Kenyans from high PAYE, yet other sectors remain inadequately taxed.  

Treasury explained that the Finance Bill 2026 proposed the redistribution of the tax burden across sectors, specifically targeting under-taxed areas such as the mitumba trade, corporate tax and digital devices.

It explained that it continued to engage the public on tax policy that will ease the PAYE burden.

“Public participation remains ongoing, reinforcing that tax policy is iterative and responsive, with the long-term goal of easing pressure on PAYE through a broader, more balanced tax base,” the statement read in part.

The National Treasury further defended itself for imposing a 5% presumptive tax on Mitumba Imports, therefore reducing affordability for low-income households and resulting in job losses.

It explained that the presumptive tax assumes that traders will only make a 5% profit margin on the sale of the goods.

The officials added that tax policy consolidates the taxation of mitumba products at two points: at entry and presumed income.

Therefore, all other taxation points imposed in the trade chain have been done away with, thus reducing administrative complexity and easing compliance.

“The system applies 16% VAT on goods at the point of entry. After which, it assumes a 5% profit margin from the sale of the goods. This profit will be subjected to a one-off income tax of 30% under a presumptive framework. No further taxes will be issued after this,” the statement continued.

Treasury also responded to concerns that the 25 percent excise duty on mobile phones may limit digital access, financial inclusion and the participation of youths in the economy.

It explained that the policy was a part of the plan of broadening the tax base to avoid increasing PAYE. It identified that the digital sectors reported high growth, and there was a need to tap into the revenue.

“By shifting taxation toward device activation/use, the system captures actual participation rather than relying on import declarations.

“This ensures a more equitable contribution across users while strengthening enforcement in a rapidly expanding digital economy,” the statement continued.

Odhiambo further questioned why the government decided to bring forward the deadline for filing tax returns from June 30 to April 30.

She pointed out that the move increased pressure for SMES and individuals with limited administrative capacity.

Treasury officials explained that moving deadlines earlier not only enhances tax administration efficiency and system discipline but also allows KRA to verify and validate returns within the same financial cycle.

They explained that apart from improving revenue forecasting and reducing discrepancies, it supports the shift toward a data-driven, proactive compliance system, even though it introduces short-term adjustment pressure for taxpayers.

The drafters of the Dinance Bill 2026 defended the decision to impose VAT on Digital Financial Services. They explained that the Bill clarifies VAT treatment for digital intermediaries rather than introducing entirely new taxes.

Odhiambo questioned why the Treasury imposed the Deemed Dividend Tax on 60 per cent of undistributed income, stating that it discouraged reinvestment, limited business growth and created an unfavourable business environment.

“Introducing a clear 60% threshold replaces discretionary enforcement with predictability. The intent is to ensure that profit retention is commercially justified, not tax-driven. 

“This balances investor confidence with the need to prevent prolonged deferral of tax obligations,” officials from the Treasury responded.