The National Treasury has ruled out introducing new taxes on mobile phones, cryptocurrency, and bread under the Finance Bill 2026. Treasury Cabinet Secretary John Mbadi clarified that most of the contested proposals aim to simplify the current tax system rather than heap a heavier burden on Kenyans. Addressing the media on Monday, Mbadi stated that the government intends to streamline existing levies and improve tax collection efficiency instead of slapping fresh charges on citizens.
To break down the math on mobile devices, Mbadi explained that smartphones already attract a mountain of taxes along the import and supply chain. Currently, buyers cough up 16 percent VAT, 10 percent excise duty, 25 percent import duty, a 2.5 percent import declaration fee, and a 2 percent railway development levy, amounting to a combined tax burden of about 55.5 percent.
Rather than adding to this, the new proposal would actually collapse these fragmented charges into a single 25 percent excise duty, collected directly at the point of phone activation. This shift would entirely replace the messy, multi-stage tax system currently applied throughout importation and distribution.
Mbadi explained that the current tax arrangement forces traders to pay heavy taxes upfront before they can even sell their goods, which severely strains their cash flow and inflates operational costs. Under the proposed framework, the government will entirely eliminate VAT, import duty, import declaration fees, and the railway development levy for mobile phones. The state describes this sweeping change as a major step toward structural efficiency and transparency.
“The proposal does not introduce a new tax on mobile phones. The proposal was conceived as a tax simplification and rationalisation measure rather than a new tax on digital access,” he stated.
Furthermore, the Treasury boss dismissed widespread rumors that digital content creators would face a fresh 5 percent withholding tax, clarifying that no such levy exists in the Bill.
The Treasury also denied reports regarding a VAT on bread, a revived vehicle circulation tax, or claims that the state would spy on personal mobile money and phone data. Mbadi insisted that existing data protection laws remain firmly in force, meaning the KRA cannot legally access M-Pesa records.
Addressing public concerns over cryptocurrency taxation, Mbadi noted that the digital asset proposals aim to plug existing regulatory gaps and align reporting standards with traditional financial systems.
“The rapid growth of digital and virtual asset transactions has created gaps in the legal framework due to a lack of clear reporting obligations,” he said. He added that the new rules simply aim to introduce standard record-keeping practices, mirroring the oversight already used in the formal financial sectors.
The Treasury also confirmed that it withdrew proposed hikes on residential rental income tax and imported mitumba clothing following intense public consultation. Mbadi pointed out that many of the hostile claims circulating online stem from pure misinterpretations of the document. This timely clarification lands just as the Bill undergoes public participation in Parliament amid a raging national debate over digital taxation and relentless cost-of-living pressures.
Shifting to broader fiscal policy, the National Treasury warned that Kenya may have to aggressively slash its 2026/27 budget if economic growth slows any further, citing tightening revenue collection and incredibly rigid spending commitments. Mbadi noted that the government is currently reviewing its economic growth projections, admitting that the state will likely revise its current 5 percent growth estimate downward.
“We are monitoring the situation. All economies are revising growth projections downwards, including Kenya,” he said.
He explained that when economic growth dips, tax revenues naturally plummet. This leaves the state with few options, forcing tough decisions between borrowing or heavier taxation, both of which have already hit their limits.
“We have no option but to come for more taxes. Borrowing is another no-go zone. So what is the other option left? Cut the budget. However painful it is, we may go that route,” Mbadi warned, indicating that painful spending cuts may soon become inevitable.
The CS noted that the proposed Sh4.82 trillion budget leaves the government with almost no wiggle room. Debt servicing alone gulps down a massive Sh1.5 trillion, while civil servant salaries, county allocations, school capitation, CDF, pensions, fertilizer subsidies, and national security swallow up the remaining fiscal space. “The budget is so rigid. We have boxed ourselves,” he admitted.
Mbadi also defended the state’s aggressive efforts to stabilize the shilling, warning that a weaker currency would instantly spike foreign debt repayment costs. He criticized opposition calls to scrap the government-to-government oil import deal, arguing that such a move would heavily destabilize the wider economy.
Ultimately, the Treasury boss made it clear that while Kenya has successfully steered clear of immediate default risks, the country remains under immense fiscal pressure that demands incredibly careful management.
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