The proposed Finance Bill 2026 is introducing major tax changes targeting Kenya’s mitumba trade and the mobile phone sector, with the government saying the move is aimed at improving tax collection, sealing loopholes, and simplifying compliance.
The proposals have already sparked debate among traders, consumers, and digital rights groups, many warning that the new measures could raise the cost of living and make technology less affordable.
Why the Government wants to Tax Mitumba imports
One of the key proposals in the Finance Bill is a new presumptive tax regime for imported second-hand clothes, commonly known as mitumba.
Under the proposal, mitumba imports would continue attracting the standard 16 percent VAT at the point of entry. The government would then assume traders make a 5 percent profit margin on the goods, and that presumed profit would be subjected to a one-off 30 percent income tax.
According to the Treasury, the new system is meant to replace what it describes as a fragmented and unpredictable taxation structure that currently exposes traders to multiple tax obligations and frequent disputes.
Officials argue that the new model will simplify taxation by ensuring taxes are settled upfront during importation instead of through several enforcement stages later in the supply chain.
The government also says the proposal emerged from consultations with mitumba traders, some of whom preferred a predictable import-based taxation model rather than continuous compliance checks after goods enter the market.
Another reason behind the proposal is to address under-declaration of income among large-scale importers. Treasury officials believe some traders have been reporting little or no taxable income despite handling high-volume businesses.
Why Mobile phones could attract 25% excise duty
The Finance Bill 2026 is also proposing a 25 percent excise duty on mobile phones, a move likely to increase the retail price of smartphones and other handsets.
The government says the tax will be charged at the point of device activation rather than at importation or sale.
According to the Treasury, this system is intended to improve enforcement and ensure every phone entering active use in Kenya is captured within the tax system.
Officials further argue that the proposal is part of a broader strategy to strengthen revenue collection from the growing digital economy while shifting away from multiple withholding taxes toward a final presumptive tax model.
Under the proposed structure, tax obligations would be settled upfront, reducing the need for additional filings later.
Concerns raised by consumers and traders
Despite the government’s explanation, the proposals are facing criticism from different sectors.
Mitumba traders fear the added tax burden could increase the cost of second-hand clothes, which remain the most affordable option for millions of Kenyans.
Technology experts and digital rights advocates have also raised concerns over the proposed mobile phone excise duty, warning that higher smartphone prices could slow digital inclusion at a time when the government is encouraging citizens to access services online.
Critics argue that taxing phones more heavily may disproportionately affect low-income earners, students, and small businesses that rely on affordable internet-enabled devices.
What happens next
The proposals are expected to face intense scrutiny as Parliament begins public participation hearings on the Finance Bill and the 2026/27 Budget Estimates.
Kenyans, businesses, and lobby groups are expected to submit views on whether the proposed taxes should be amended, retained, or dropped before lawmakers debate and vote on the Bill.
