The National Assembly’s Finance and National Planning Committee tabled its report on the Finance Bill 2026 on Tuesday, setting up a key parliamentary debate as lawmakers move closer to deciding the country’s tax and revenue framework for the 2026/27 financial year.
Presented by committee chairperson Kimani Kuria, the report is among the final legislative stages before the Bill can be enacted into law.
MPs were expected to take the Bill through the Second Reading on Wednesday, with strong prospects that it would move to the Committee of the Whole House for clause-by-clause scrutiny.
Nine volumes containing more than 100,000 submissions from members of the public and stakeholders gathered during public participation were also tabled before the House.
During Tuesday’s session, debate on the committee report featured sharp exchanges as MPs disagreed over several proposed tax measures and the panel’s recommendations.
The Finance Bill 2026 aims to raise an additional Sh98.9 billion, more than three times the roughly Sh30 billion expected from the Finance Act 2025 and Tax Laws (Amendment) measures introduced after the Finance Bill 2024 was withdrawn.
The abandoned Finance Bill 2024 had been expected to raise Sh344 billion before it was rejected amid widespread public resistance.
The tax policy changes that followed were intended to ease pressure on households and businesses while safeguarding government revenue.
In presenting the report, Kuria assured lawmakers that contentious proposals would be referred back to the National Treasury for further review where required.
One of the issues drawing the most attention was the lack of tax relief for workers earning Sh30,000 and below.
Kuria told the House that the committee had asked the National Treasury to reconsider the proposal and examine the wider structure of PAYE taxation.
He said the committee recommended that the Treasury revisit a broader overhaul of tax bands.
The committee noted stakeholder concerns that high-income earners still face tax rates of up to 35 per cent, saying a full review of the PAYE structure would support a fairer and more balanced tax system.
On the proposed taxation of imported mobile phones, the committee backed the Treasury’s plan to merge existing levies into a one-off tax of 25 per cent.
However, it rejected the proposal to levy the tax when mobile devices are activated.
Kuria said it was important to establish a framework ensuring the correct software is installed, data is shared with Tangos, and the Communications Authority is prepared to collect tax upon activation.
He argued that the country lacks the systems needed to implement activation-based taxation effectively without causing inconvenience to consumers.
He asked what would happen if a person bought a phone from a dealer without knowing whether taxes had been paid, sent it to a sibling in a village, and the recipient was later told the device could not be used because the required taxes had not been paid.
According to the committee, a sound implementation framework would protect revenue while ensuring ordinary Kenyans do not suffer because of compliance failures by importers and dealers.
The committee also proposed major changes to plans for introducing minimum tax on deemed dividends.
While accepting the Treasury’s view that the measure is needed to curb tax avoidance through prolonged retention of profits, MPs opposed the proposed 60 per cent threshold.
Stakeholders had objected to a proposal to amend Section 24 of the Income Tax Act so that undistributed corporate profits held for more than 12 months would be treated as deemed dividends subject to tax.
Kuria said the committee proposed reducing the threshold to a maximum of 40 per cent to balance revenue collection with the need to allow businesses enough flexibility to retain earnings for growth and investment.
The committee also supported the proposal to stagger tax return filing deadlines to reduce pressure on the Kenya Revenue Authority’s systems.
Under the Treasury proposal, nil returns would be filed by January 31, individual returns by April 30, and corporate returns by June 30.
However, the committee recommended keeping only two filing deadlines.
Kuria said the committee noted that nil returns require minimal information, while corporate returns involve more detailed financial records and compliance procedures, so it recommended two timelines: four months for individual taxpayers and six months for corporate taxpayers.
He said the changes would reduce the annual rush that often overwhelms KRA systems as taxpayers try to beat the June 30 deadline.
The committee also said it would seek further amendments to the Income Tax Act to ensure fees from card-based transactions remain taxable while preventing extra costs from being passed on to consumers.
It further backed the Treasury’s proposal for a one-year tax amnesty targeting defaulters, saying the measure could encourage the settlement of outstanding principal tax liabilities.
However, the committee cautioned that repeated amnesties could encourage a culture of non-compliance.
Kuria said the committee noted that, although the measure offers relief to taxpayers, it is risky for the country and could be seen as unfair.
He said taxpayers who comply with their obligations could view the measure as rewarding individuals and businesses that deliberately failed to meet their tax responsibilities.
Some taxpayers, he added, argued that if interest and penalties were to be forgiven for those who did not pay, refunds should also be considered for those who had paid them.
As the Bill enters its decisive stages, lawmakers are expected to hold intense debates over the proposed measures as Parliament balances the need for additional revenue against rising concerns about the tax burden on households and businesses.