NAIROBI, Kenya- Former Law Society of Kenya president Faith Odhiambo has raised sharp concerns over several proposals contained in the Finance Bill, 2026, warning that Parliament must not “rubber-stamp” measures that could deepen the financial burden on ordinary Kenyans and businesses.
In a detailed critique of the Bill currently before Parliament, Odhiambo said while the government’s target of raising Sh3.63 trillion in revenue for the 2026/27 financial year was understandable, the burden-sharing mechanisms proposed in the legislation were unfair and risked hurting small traders, salaried workers, and low-income earners.
“The government targets Sh3.63 trillion in revenue for 2026/27 and a wider budget deficit of 5.3pc of GDP. These are not unreasonable fiscal objectives, but the manner in which the burden of achieving them is distributed is a cause for serious concern,” she said.
Odhiambo criticised proposed changes to tax filing timelines, noting that moving the income tax return deadline from June 30 to April 30 would place unnecessary pressure on businesses and taxpayers.
According to her, compressing nil return filing timelines to January 31 would increase compliance costs, especially for small businesses and individual traders already struggling with cash flow challenges.
On the proposed taxation of mitumba imports, Odhiambo faulted the introduction of a new Section 12H into the Income Tax Act, which would require traders to pay a final tax equivalent to 5pc of the customs value of imported goods before release by the Kenya Revenue Authority.
She argued that the proposal ignores the realities of business losses.
“A trader importing a bale worth Sh1 million pays Ksh50,000 regardless of whether they make a profit or a loss. I cannot in good conscience describe this as equitable,” she said.
The former LSK boss also opposed the proposal to increase residential rental income tax from 7.5pc to 10pc, arguing that the government had failed to seal enforcement loopholes before raising rates.
“Absent a serious enforcement framework, this will drive non-compliance rather than revenue. The government must fix the enforcement gap before it increases the rate,” she stated.
Odhiambo further warned that removing VAT exemptions on digital financial services such as money transfers and payment processing would undermine financial inclusion by making essential services more expensive for millions of Kenyans.
She also questioned provisions seeking to classify interchange and merchant service fees as management or professional fees for withholding tax purposes, saying the move would create fresh compliance burdens within automated banking systems.
On corporate taxation, she criticised amendments empowering KRA to treat at least 60pc of undistributed company income as dividends for tax purposes.
According to her, the proposal ignores legitimate business decisions such as reinvestment, working capital preservation and expansion.
“It is a retrogressive measure that sends the wrong signal to the investors Kenya needs,” she warned.
Odhiambo also took issue with the proposed 25pc excise duty on mobile phones, arguing that mobile devices are now essential tools for communication, banking, business and access to government services.
At the same time, she questioned the absence of the much-anticipated Pay As You Earn (PAYE) relief that many salaried Kenyans had expected.
“Kenyans were led to expect relief and a restructuring of the 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.
However, Odhiambo acknowledged that the Finance Bill contains several positive measures, including the reduction of corporate tax for non-resident companies from 37.5pc to 30pc, extension of the tax amnesty programme to December 31, 2025, and VAT exemptions on electric buses, bicycles, dialysers, animal feed raw materials and PPP infrastructure projects.
She also welcomed provisions clarifying trust taxation and exempting gratuity contributions from taxation.
Even so, she cautioned lawmakers against passing controversial clauses without adequate scrutiny, referencing the nationwide unrest witnessed during the Finance Bill 2024 debate.
“We cannot afford a repeat of June 2024. Parliament must discharge its oversight role with the seriousness this moment demands,” she said.
Odhiambo urged MPs to reject or amend punitive and ambiguous provisions in the Bill before its passage.
