COFEK moves to block six Finance Bill 2026 clauses over tax, privacy concerns

A lobby group has moved to the High Court seeking orders to suspend the implementation of six contentious clauses contained in the Finance Bill, 2026, arguing that the proposed measures violate constitutional safeguards on taxation, privacy, public participation and consumer rights.

In a petition filed before the Constitutional and Human Rights Division of the High Court, Consumers Federation of Kenya (COFEK) has asked the court to issue urgent conservatory orders stopping the enforcement of the disputed provisions pending the hearing and determination of the case.

"The court does issue a conservatory order suspending the commencement, implementation, operationalisation, enforcement or application of any enacted provisions corresponding to the six contested clauses," COFEK seeks.

The lobby has sued the Treasury Cabinet Secretary John Mbadi, the Commissioner General of KRA and the Attorney General, challenging sections of the Bill that it claims would impose unfair tax obligations and give state agencies excessive powers without adequate safeguards.

COFEK is challenging proposals introducing a withholding tax on scrap metal transactions, expanding the definition of taxable payments including royalties and management or professional fees, removing certain VAT exemptions and zero-rated supplies, changing East African Community rules-of-origin provisions, establishing a virtual asset reporting framework and enhancing KRA’s tax administration powers.

In court documents, COFEK, through Secretary General Stephen Mutoro, argues that the Finance Bill, 2026, represents one of the most extensive restructuring exercises of Kenya’s tax framework in recent years.

"The Finance Bill contains far-reaching fiscal, economic, regulatory and constitutional implications affecting consumers, taxpayers, businesses, investors, informal sector participants and members of the public throughout the Republic of Kenya," Lawyer Mutoro says.

The petitioner has raised concerns over the proposed 1.5 per cent withholding tax on scrap metal dealings, arguing the measure would disproportionately affect small traders, informal sector workers and vulnerable groups who depend on the industry for their livelihoods.

“The scrap metal sector within Kenya is substantially comprised of small-scale traders, informal sector participants, youth groups, waste collectors and economically vulnerable persons whose earnings are dependent upon low-margin transactions," Mutoro states.

COFEK argues that applying tax on gross proceeds instead of actual profits raises questions on fairness and whether the tax burden would be shared equitably as required under Article 201 of the Constitution.

The lobby has also challenged provisions introducing reporting obligations for virtual asset transactions, claiming the proposed framework lacks sufficient protections for personal data.

According to the petition, the virtual asset reporting regime lacks express safeguards relating to data minimisation, purpose limitation, retention periods, independent oversight and proportionality,” raising concerns under Article 31 of the Constitution and the Data Protection Act.

COFEK further argues that the process leading to the Bill’s consideration did not meet constitutional standards for public participation, claiming Kenyans were not given sufficient information to understand the impact of the proposed changes.

“Public participation cannot be meaningful where members of the public are deprived of information necessary to appreciate the true effect and consequences of proposed legislation,” Mutoro states in the court documents.

The organisation says it did not participate in one of the parliamentary committee sessions on the Bill, citing concerns over inadequate disclosure of the consequences of the proposed amendments.

Through an application filed alongside the petition, COFEK wants the court to suspend the commencement, implementation or enforcement of the challenged clauses until the case is heard and determined.

The lobby is also seeking orders allowing the petition to continue as a challenge to the Finance Act, 2026, should the Bill become law before the court determines the matter.

COFEK wants the court to declare the contested clauses unconstitutional, null and void, and prohibit the Treasury and KRA from implementing the measures unless they are brought into conformity with constitutional requirements.

The case now awaits directions from the High Court on the hearing of the urgent application.