How Finance Bill debate glosses over important revenue questions

With public participation on the 2026 Finance Bill and the 2026/27 budget estimates now complete, we should expect the respective Finance & Planning, and Budget & Appropriations, Committees of the National Assembly to issue their eagerly-awaited reports, which will lead to the 2026 Finance and Appropriations Acts at any moment in the coming month.  In simple terms, we will get to learn about tax changes, but spending as a total for 2026/27.

You can probably see an argument that we shouldn’t just be looking at changes to revenue, but the total revenue, in order to have a full budget picture. In other words, not just a Finance Bill/Act, but an Annual Revenue Bill/Act to mirror the Annual Appropriations Bill/Act, because you cannot spend what you don’t have.  Part of this reasoning was offered in the case against the 2023 Finance Act, but the Supreme Court didn’t buy it. The counterargument against a Revenue Act is that our revenue-raising acts are “permanent”, needing only adjustment, as is broadly the case around the world. Put differently, because governments are perpetual, so are their tax laws. Or more crudely, as long as we have government, we will have spending, so we need these taxes.

Thought about this way, any Finance Bill reflects an implicit assumption that the existing tax regime is fine and acceptable, until it is changed. So, it is not the tool to completely overturn our tax code.  Given this cold reality, let’s pursue two sets of revenue reflections going into 2026/27.

The first reflection is about the 2026 Finance Bill itself.  With the 2024 protests still fresh in the national memory, both the National Treasury and Parliament have gone out of their way to “sell” the bill to the public, with full-page adverts, “fake news” flyers and face-to-face engagement.  But the message is bureaucratically blunt; the objective is to raise revenue, boost compliance, seal loopholes, simplify procedures and align with international and modern business practice.

There is little sense of a collective call to action that moves from “which country is this?” (where we were a generation ago) to “whose country is this?” (where we are now) to “this is my, and our, country” as a taxpayer mindset that connects the dots for us. As one famous meme says, “there is no such thing as government-funded spending, there is only taxpayer-funded spending”.

Instead, public participation on this year’s Finance Bill seems to have surfaced four main messages. 

First, this is a bill for the wealthy, not for the poor.  The multiple tax adjustments for mobile phones, not just the “unifying” 25 per cent excise duty, have elicited negative comments from industry players and the public, with the fear of increased consumer prices.  The failure to ease PAYE tax brackets amidst the high cost of living is a broken promise for lower-income earners. And more to the point, as the bankers have noted, failure to see how this easing flows into the economy while moaning about potential revenue losses, which are one per cent of the tax take.

Second, we are in George Orwell’s 1984. The Treasury, in particular, has been extremely vocal in selling its “you should have nothing financial to hide” or “Big Brother” pivot to increased digital surveillance. The poster child here is algorithmic tax assessments, where the data determines the rules, not the rules determining the data, where data privacy arguments will come face to face with a real need to expand our largely narrow tax base. And this is just the beginning.

Third, there is our traditional “chaos” factor.  True to form, we continue to flip-flop on tax policy predictability. Here, we’re talking about everything from “up-down-up” rental taxes to “on-off” taxes on scrap metals and game winnings (betting and gambling).  Seeing this as a continuing habit, the Institute of Economic Affairs recently identified at least seven tax items that have been introduced, repealed or re-rated in cycles incapable of supporting long-term investment planning. It wasn’t too long ago that the IMF identified Kenya as the most unpredictable tax environment in the East Africa region, with roughly twice as many tax changes annually as the regional average.

The fourth message, “smash and grab”, essentially sums up the first three.  Because tax policy keeps flip-flopping, businesses cannot plan effectively, which slows revenue collection. To make up for the shortfall, Big Brother is needed to monitor every shilling, ultimately extracting revenue from the poor and working class through regressive consumption taxes on daily necessities.

There is a biting irony to this last observation, as it leads us to a second reflection on revenue.  If we go back to the beginning of this administration, we will remember their “bottom-up tax equity” hierarchy, wealth-consumption-income-trade, as a novel “burden sharing” tax ambition. 

Arguing that Kenya over-taxed trade and under-taxed wealth, the idea was to focus on “under-taxed” wealth, then consumption (to capture informal sector transactions), income (below consumption to “protect payslips”) and trade (towards “Make or Buy Kenya, Build Kenya”).  This would have differed from a more conventional and less distorting “tax efficiency” hierarchy, beginning with consumption, then income, wealth and trade.  But then they found empty coffers.  They also found, as with most of their big initiatives, inadequate capacity to deliver this ambition.

So, the picture we have today is almost zero movement on the wealth front, an overreliance on consumption and income, and more effort on trade. Rough modelling suggests that an ideal 20-25-50-5 wealth-consumption-income-trade mix is currently divided as 2-37-43-18.  Under a more pragmatic efficiency scenario, this mix would hover around 1-54-35-10, which is more realistic on wealth, more ambitious on consumption, and more generous on income and trade.  The paradox in this efficiency scenario is that its focus on compliance could deliver the equity we seek.

Which brings us to the national tax policy and the now-ending medium-term revenue strategy (MTRS). One common observation being made, especially by private sector players, is that we basically ditched these medium to long-term policy-strategies in favour of the short-term, crisis mode transactional approach, which Finance Bills, including this latest one, adopt. As technicians might say, we are stuck with the short-termism of tax buoyancy (tax growth from government interventions) before longer-run tax elasticity (organic tax growth from economic growth).

Going into a new MTRS, one hopes that it leads us to a predictable, fair, efficient and equitable medium to long-term revenue perspective that overrides the Finance Bill’s crisis-like immediacy. Not forgetting that, despite promises, we have never comprehensively reviewed our tax code.

And just maybe we should apply a broader lens to revenue, beyond taxes and tax policy, to non-tax revenues, including appropriations-in-aid that reflect payments for specific public services. 

Indeed, from a whole of government, or general government, lens, we should now be talking about a country revenue strategy including counties, since we’re all the same tax and fee payers navigating trade-offs between taxes for public goods and fees for specific public goods/services.

Here is a closing thought.  Despite successive Finance bills, our tax take has been stuck at 13-14 per cent of GDP for the past decade or so.  So, as the 2026 one is finalised, here’s a tax buoyant and tax elastic question: if nominal growth (including inflation) equals, and exceeds, the projected increase in the tax take, what’s the bill for?  Let’s see if the Committee has an answer in its report.