Tone-deaf: Ruto sneaks back tax measures Gen Z protested in 2024

Two years after the June 2024 Gen Z protests forced the government to withdraw the Finance Bill 2024, the government appears to have learned nothing and continues to deploy the same aggressive, revenue-maximising tax strategies that saw the youthful Kenyans take to the streets.

At the time, Kenyans were asking for relief and two years on, the pressure has intensified, with record-high fuel prices driving up the cost of essentials. Instead of offering relief, the government has this year proposed measures that could push the cost of living even higher.

While the Finance Bill 2026 has proposed few tax increases compared to scenarios experienced in past Finance Bills, the few that are present as well as the proposed tax administration measures are expected to have heavy impact on the livelihoods of Kenyans.

The Bill is seen as focusing on further growing revenue to meet Treasury’s target of Sh3.6 trillion, with the measures in the Finance Bill expected to raise a further Sh120 billion. There is however no evidence of a government that is making efforts to cut wasteful expenditure, address corruption or serious steps to expand the tax base and spread the tax collection headache beyond the traditional small pool of taxpayers – the issues that Gen Zs demanded for when they took to the streets in 2024 and even last year.

Stakeholders have also faulted the National Treasury for reintroducing clauses that have been rejected in past Finance Bills into the current proposals, including giving unfettered powers to Kenya Revenue Authority (KRA) to access personal data.

The Finance Bill 2026 has proposed measures that eliminate protections on basic goods. In what could be a significant hit for Kenyans, Finance Bill 2026 has proposed migrating numerous VAT zero-rated products to the exempt category, a move that is expected to increase the cost of essential goods and services. It has also slapped fresh levies on digital transactions in what could significantly raise the cost of

The National Council of Churches of Kenya (NCCK) has  criticised the Bill for failure to focus on strategies that would spur business, expand the tax base and grow the economy but also curtail corruption and cut government waste. These are among the issues that Gen Zs repeatedly called for during their 2024 protests.

The clergy warned that if the National Assembly passes the bill without sweeping revisions, it is “bound to cripple economic growth, impoverish Kenyans... and infringe on basic constitutional rights.”

NCCK also said in advancing aggressive tax policies that have previously pushed the nation to the brink, Kenya once again finds itself standing at a dangerous, familiar crossroads.

“The failure by the Finance Bill, 2026 to present concrete actionable measures for the government to cut expenditure to fit within the projected income or strategically grow the economy to expand government income is a major policy failure that the National Assembly, as the people’s representatives, should demand is remedied,” said NCCK

“Indeed the hope and anticipation of Kenyans was that through the Finance Bill 2026, the government would establish a growth-oriented micro and macro economic environment designed to spur business recovery, production enhancement and industrialisation. Further, Kenyans were hoping for improved financial accountability and safeguarding to curtail the endemic corruption that has proved to be the revenue loss in the country.”

“Unfortunately, the provisions in the Finance Bill, 2026, are the direct opposite of this aspiration. If passed without major revisions, the Finance Bill 2026 is bound to cripple economic growth, impoverish Kenyans who will have to spend more on taxation without requisite increase of incomes, and infringe on basic constitutional rights of the citizens.”

The clergy also noted that Kenya’s tax policy requires taxation to remain steady and predictable, avoiding frequent changes while at the same time preventing economic imbalances and market distortions. They added that Finance Bill 2026 is in contrast to these tenets and is instead acting as a financial stranglehold.

“The national tax policy aligns to the universal principle that the government taxes incomes, not expenses, and tax levels are premised on the ability to pay. It is therefore inimical to find that the tax measures outlined in the Finance Bill 2026 are primarily focused on increasing revenue without attendant consideration of the payers’ ability to pay,” said NCCK.

“While being mindful of the government’s need to generate revenue to fund operations and essential services, we recommend that the Finance Bill 2026 be withdrawn to facilitate a complete overhaul to a people-centric economy growing premise. Failing this, we recommend the following essential amendments of the Finance Bill 2026 before it is passed by the National Assembly.”

The Finance Bill contains proposals that are likely to push up the cost of sending money through mobile money platforms. It has proposed the introduction of a withholding tax of five per cent on mobile money and card transactions, which stakeholders say will increase the cost of digital transactions. This could reverse the gains made in adoption of digital payments as higher costs might force traders and consumers to use cash transactions. Other than the ease of transaction, stakeholders say this will increase security risks but also negates the government’s financial inclusion agenda.

The Bill has also expanded the definition of royalty to include proprietary digital platforms, which analysts say could see the charges by mobile money, card transactions and digital platforms be seen as royalties and attract a withholding tax of 20 per cent.

It also proposed to VAT mobile money  and other digital payments at 16 per cent.

The Kenya Private Sector Alliance (Kepsa) noted that proposed measures could increase the total tax burden on a Sh100 Merchant Discount Rate (MDR) transaction from Sh15 to Sh53.40 as service providers pass costs to consumers.

NCCK noted that the move would reverse gains made in deepening financial inclusion while the Institute of Certified Public Accountants of Kenya (ICPAK) noted that the move negates governments “objectives of promoting cashless transactions and expanding digital financing infrastructure”.

The Finance Bill has proposed the mass deletion of zero-rated goods. The reclassification, players noted, would have a huge impact on Kenyans, as the goods will now attract VAT at 16 per cent. It has also reclassified other goods as VAT exempt. Zero rated supplies are cheaper as manufacturers are allowed to claim a refund on input tax. Exempt supplies, on the other hand, are not taxable and any related input tax is therefore not deductible.

“Moving these items from zero-rated to exempt does not reduce consumer prices, it removes the manufacturer’s right to claim back input VAT, increasing production costs. Zero-rating benefits producers; exemption benefits only the final consumer on that specific supply but cascades tax through the value chain,” said NCCK.

The Consumers Federation of Kenya noted that the mass deletion of zero-rating categories and multiple VAT exemption paragraphs removes consumer protections on basic goods without any compensatory relief mechanism. This, Mutoro said, violated the non-retrogression principle under Article 43 of the Constitution.

“This wholesale removal converts previously zero-rated supplies to standard-rated (16 per cent VAT), with immediate consumer price impacts. Without a regulatory impact assessment, it is impossible to determine which specific goods are affected,” he said

“This is constitutionally the most concerning provision in the entire Bill. Article 43 requires the State not to take retrogressive measures on economic and social rights without compelling justification. The sudden VAT imposition on zero-rated goods — particularly if they include basic foodstuffs, health products, or educational materials — directly violates this non-retrogression principle.”

Tax experts also pointed out that expanding the definition of royalties to include proprietary digital platforms creates immense tax uncertainty. They warn it could lead to double taxation on standard software-as-a-service (SaaS) and cross-border fintech infrastructure, making Kenya less attractive to multinational tech hubs

Francis Kamau, tax partner at Ernst & Young, said taxing payment infrastructure as royalties would increase transaction costs and create fragmentation across jurisdictions, undermining regional digital integration.

“The proposal conflates payments for services and infrastructure access with royalties, contrary to established international tax principles under the UN Model, which distinguishes between royalties (IP-based payments) and service fees, the latter being taxed under separate provisions. While the UN Model supports source-country taxation, it does so through distinct mechanisms ( for example services provisions) rather than expanding the royalty definition,” said Kamau in submissions to the Finance and Planning Committee.

“This proposal therefore introduces conceptual inconsistency and classification ambiguity, increasing the likelihood of disputes.”

“The proposed treatment is also misaligned with African Continental Free Trade Area objectives, which seek to promote a predictable, transparent, and harmonised digital  trade ecosystem, including the interoperability of  cross-border digital payment systems.”

The document has also been criticised as favouring the rich. A joint memorandum on the Bill by the Institute of Public FInance and the Kenya Women Parliamentary Association said it introduces exemptions that are contrary to the ideals of equitable wealth taxation.

“The Bill introduces tax exemptions that appear inconsistent with the broader policy objective of equitable wealth taxation. In particular, the proposed exemption of Capital Gains Tax (CGT) on transfers of property into Real Estate Investment Trusts (REITs) raises significant concerns regarding equity and the creation of potential tax minimisation opportunities for HNWIs (high net worth individuals),” reads the memorandum, which also notes that the proposal is in addition to previous amendments on CGT.

“While such exemptions may be intended to encourage investment and deepen capital markets, they risk disproportionately benefiting wealthy individuals and sophisticated corporate structures at a time when ordinary taxpayers continue to bear a significant Pay-as You-Earn burden and high living costs.”

“Consequently, there is a need for the Bill to adopt a more balanced and coherent approach towards wealth taxation by prioritising relief measures for ordinary income earners while limiting broad exemptions that may disproportionately benefit holders of substantial capital assets.”

Stakeholders also raised concerns about Treasury reintroducing clauses that have been rejected in the past, including giving unfettered powers to Kenya Revenue Authority to access personal data.

“Law Society of Kenya (LSK) has observed a recurring pattern in this Bill of reintroducing proposals that Parliament and stakeholders have previously rejected, including the removal of weekend and public holiday exclusions in computing appeal timelines and the expansion of agency notice powers. This approach undermines legislative integrity and public trust,” said LSK President Charles Kanjama in submissions to Parliament on the Finance Bill.

The Bill also does away with income tax exemption granted to individuals registered under the government’s gig economy project, the Ajira Digital Programme. This, stakeholders said, would deal a major blow to over half a million young people registered under the programme.

terming it as a regressive reversal of youth employment support measure.

The Bill also reduces the tax filing window by two months from June 30 to April 30, increasing the compliance costs for individuals and corporations. Nil-returns will also have to file their returns by January 31, which is seen as disproportionately affecting informal-sector players, who have limited access to tax professionals who could help them move that quickly.