State invites public views on new tax plans amid criticism

The National Treasury Cabinet Secretary John Mbadi has invited ordinary Kenyans and businesses to propose new tax policies, a move framed as a democratic exercise.

The outreach comes amid fierce criticism that President William Ruto’s government’s relentless revenue drive is overburdening a struggling economy.

In a public notice issued by the National Treasury, Mbadi called for submissions for the next financial year (2026-2027) budget, citing constitutional principles of public participation. “The National Treasury hereby invites the members of the public ... to make submissions for consideration in the fiscal budget,” the notice stated, asking for specific amendments to tax laws to support the government’s “Bottom-Up Economic Transformation Agenda.”

The invitation, with a deadline of December 31, 2025, requests detailed justifications and evidence for any tax proposals. It emphasises the goal of “strengthening revenue mobilisation.”

The call for ideas comes amid a wall of opposition from business lobbies, economists, and ordinary Kenyans, who say they are weary of the government’s repeated tax hikes. 

The Parliamentary Budget Office (PBO), which is Parliament’s independent adviser, earlier labelled the Treasury’s revenue forecasts as “over-optimistic” and warned of “unsustainable spending.”

The PBO report expressed deep scepticism about the Treasury’s ability to meet its Sh3.4 trillion revenue target for the current financial year, noting a “persistent mismatch between revenue growth and the expanding economy.” 

It highlighted the Kenya Revenue Authority’s (KRA) consistent failure to hit targets. It warned that aggressive domestic borrowing “may exert upward pressure on interest rates [and] crowd out private sector credit.”

President Ruto’s administration has enacted a series of revenue-raising measures, including a new three per cent digital service tax on global firms like Netflix and Airbnb, and a just-implemented 15 per cent global minimum corporate tax for large multinationals to curb profit shifting. Despite these efforts, Kenya’s public debt has ballooned by Sh2.85 trillion since September 2022 to cross the Sh12 trillion mark, with interest payments consuming a staggering 33 per cent of government revenue—among the highest burdens globally, according to Moody’s Investors Service.

“The government is caught between a rock and a hard place. It has a massive debt service bill and a funding gap, but the tax base is exhausted and informal,” said an economist at a leading Nairobi-based consultancy, who declined to be named due to the sensitivity of the issue. “Inviting public input is legally sound, but it feels tone-deaf when the core complaint is the weight of existing taxes, not a lack of ideas for new ones.”

President William Ruto withdrew a contentious Finance Bill containing significant tax hikes in late June 2024 after nationwide, youth-led (Gen Z) protests turned deadly, with police clashes resulting in dozens of casualties and drawing intense international scrutiny.

The Treasury, under Mbadi, has defended its strategy as necessary for fiscal consolidation. It has also pointed to administrative reforms, including deploying artificial intelligence to boost KRA’s collection, which President Ruto claims has increased revenues by 40 per cent.

Yet, the PBO and Moody’s warn of structural issues, including a narrow tax base, a vast untaxed informal sector, and over Sh3 trillion in tax exemptions. The PBO also criticised specific recent measures, suggesting a new betting tax could “drive players away from formal platforms” and undermine revenue goals.

As the December deadline for submissions approaches, the Treasury’s invitation sets the stage for the next fiscal battle.

The Kenya Revenue Authority (KRA) will from January 2026 launch a radical digital crackdown on small traders, using real-time data from electronic invoices and customs records to identify tax evaders in one of the agency’s most comprehensive enforcement pushes to date.

In a public notice last month, the tax authority said it would begin “validating income and expenses declared in both individual and non-individual income tax returns” against three digital data streams: TIMS or eTIMS invoices, withholding income tax records, and import declarations from customs systems.

The validation will apply to returns for the 2025 tax year submitted through KRA’s iTax platform, representing a significant escalation in the authority’s efforts to widen the tax base through technology.

The eTIMS system, which requires real-time transmission of invoices to KRA servers, has become the centerpiece of the authority’s strategy to create an auditable digital trail to curb evasion.