Finance Bill 2026 draft has opened a fresh debate over the government’s tax policy direction, with early analysis pointing to new levies on mitumba imports and stronger collection powers for the Kenya Revenue Authority.
The Bill, which is expected to anchor revenue measures for the 2026/27 financial year, comes as Kenya enters the final year of the Medium-Term Revenue Strategy covering 2023/24 to 2026/27. Tax analysts say the proposals suggest Treasury is attempting to accelerate implementation of a revenue strategy that has lagged behind schedule, while widening the tax base beyond formal salaried workers.
One of the most eye-catching proposals is the introduction of a new section, 12H, in the Income Tax Act. The provision would impose a 5 percent tax on the customs value of imported worn clothing, worn footwear and other worn articles classified under tariff heading 6309.
The proposal directly targets the mitumba trade, one of Kenya’s largest informal-sector value chains and a major source of affordable clothing for households. If enacted, the tax would apply at importation, meaning importers would face an additional cost before goods enter the local market.
The proposal appears consistent with the government’s Medium-Term Revenue Strategy, which signalled a plan to use customs data to identify micro and small enterprises and improve taxation of sectors that have traditionally operated outside the formal income tax net. Analysts say this suggests Treasury is increasingly using import records, digital systems and third-party data to bring informal or semi-formal businesses into the tax system.
The Finance Bill also proposes changes to the Tax Procedures Act that could affect taxpayers contesting assessments issued by KRA. According to the thread by tax and economic analyst Julians Amboko, the Bill seeks to delete paragraph 42(14)(e) of the Act, a provision that currently protects taxpayers from agency notices where an assessment is under appeal before the Tax Appeals Tribunal or a court.
Agency notices allow KRA to collect tax debts from third parties who owe money to a taxpayer, such as banks, clients or business partners. Removing the protection could give KRA wider room to recover disputed taxes even where a taxpayer has challenged an assessment.
Tax advisers have previously described similar changes to Section 42(14)(e) as consequential because they would empower KRA to issue recovery notices to third parties despite a pending appeal against an assessment.
The proposals come at a time when the National Treasury is under pressure to raise revenue while avoiding the kind of public backlash that followed previous tax measures. The 2026 Budget Policy Statement sets out government priorities for the 2026/27 financial year and the medium term, while also framing the fiscal path for the final budget before the 2027 General Election.
Separately, Treasury Cabinet Secretary John Mbadi has confirmed that the Finance Bill will include PAYE changes aimed at easing the tax burden on lower-income workers. Under the proposals reported earlier, workers earning up to KSh30,000 would be exempt from PAYE, while those earning between KSh30,000 and KSh50,000 would face a lower rate of 25 percent on the next band.
But the emerging provisions on mitumba and agency notices suggest the Bill is not only about tax relief. It also reflects a broader policy approach: reducing pressure on some salaried workers while expanding taxation into import-linked informal trade and strengthening enforcement powers.
The mitumba tax is likely to attract scrutiny from traders, consumers and lawmakers. Supporters may argue that it creates a clearer tax framework for a large import-driven sector and helps formalise economic activity. Critics are likely to warn that the levy could raise prices for low-income households and hurt small traders who depend on the second-hand clothing business.
The agency notice proposal could prove equally contentious. Business groups and tax professionals are expected to question whether KRA should be allowed to pursue recovery measures while a taxpayer’s dispute is still before a tribunal or court. The issue is likely to revive long-running concerns over the balance between revenue collection and taxpayer rights.
The Finance Bill 2026 is therefore shaping up as a technical but politically sensitive document. While PAYE relief may dominate public messaging, the more significant story may lie in the government’s effort to close loopholes, track informal trade and give KRA stronger tools to collect taxes.
Parliament is expected to subject the Bill to public participation before debate and possible amendment. Given the controversy that has surrounded recent finance bills, the handling of proposals affecting mitumba traders, taxpayers in dispute with KRA and low-income earners could determine how the public receives the 2026 tax package.
