Heated debate as MPs pass Finance Bill 2026

On June 17, 2026, the National Assembly of Kenya concluded its deliberations on the Finance Bill 2026, passing the legislation with significant amendments after a period of intense scrutiny and debate. The bill, aimed at raising additional revenue for the 2026/27 financial year, was approved in an electronic vote where 122 members of parliament supported it, while 40 opposed it, with no legislators abstaining. This marked the end of a protracted process involving multiple stages of discussion, review, and modification.

The initial adoption of the bill was done by acclamation, but a faction of MPs requested a formal division, meeting the constitutional threshold required to trigger an electronic vote. Speaker Moses Wetang'ula presided over this procedural step, ensuring adherence to parliamentary norms. The outcome of the vote cleared the path for the bill to proceed to President William Ruto for his assent, after which it would become law.

Throughout the legislative process, the Finance and National Planning Committee played a pivotal role in reviewing the bill and proposing amendments. These included the withdrawal or revision of several contentious tax proposals based on public feedback. Notably, the committee ensured that tax reliefs on certain essential goods were maintained, addressing concerns from both consumers and industry stakeholders. The amendments reflect a balance between the government's need to increase revenue and the necessity to protect vulnerable groups from undue economic burden.

The Finance Bill 2026 encompasses a wide range of changes to various tax statutes, including the Income Tax Act, the Value Added Tax Act, the Excise Duty Act, the Tax Procedures Act, the Miscellaneous Fees and Levies Act, and the Stamp Duty Act. These modifications aim to expand the tax base, improve compliance, and bolster domestic revenue collection to support government expenditures. A major focus of the bill is the restructuring of the Pay As You Earn (PAYE) tax system, introducing more progressive tax bands for salaried workers.

Under the new framework, income falling within the Sh3.6 million bracket will be taxed at 27.5 percent, targeting higher-income earners and establishing a clearer distinction between middle and upper-income groups. For annual earnings exceeding Sh9.6 million, the highest marginal tax rate of 30 percent applies, impacting top earners in both the public and private sectors. These changes are projected to affect over 3.1 million Kenyan workers who pay their income taxes through the Kenya Revenue Authority (KRA). The new rates are set to take effect on January 1, 2027, providing employers sufficient time to adapt their payroll systems accordingly.

Another notable amendment involves the expansion of the definition of royalties to include payments made to digital payment card networks and platforms. This change covers transaction fees, network fees, processing charges, and other payments related to proprietary digital payment systems. Such a move could significantly increase the tax liabilities of international card service providers operating in Kenya.

In addition, the bill includes amendments to gambling taxation, redefining "winnings" to specifically refer to payouts from lotteries and prize competitions run by entities licensed under the Gambling Control Act, 2025. These adjustments aim to ensure clarity and consistency in the application of tax laws within the gambling sector.

Despite these amendments, the Finance Bill 2026 has faced criticism from opposition factions within the National Assembly, particularly those aligned with the United Alternative Government led by Bumula MP Wanami Wamboka. They have pointed out inconsistencies and potential drawbacks in the government's tax proposals, advocating for further revisions or even the removal of some elements of the original plan. Their critiques highlight ongoing tensions between the ruling party and opposition forces regarding fiscal policy and revenue generation strategies.

With the bill now passed by the National Assembly, the final step lies with President William Ruto, who must give his assent for the legislation to officially come into force. Once signed, the Finance Act 2026 will serve as the legal foundation for implementing the government's tax policies and revenue mobilization efforts for the upcoming financial year. The subsequent implementation phase will likely involve extensive coordination among various government agencies, including the Kenya Revenue Authority, to ensure smooth execution of the new provisions.