Faith Odhiambo Warns Proposed Finance Bill 2026 Could Regnite Public Anger

NAIROBI, Kenya, May 9 – Former LSK President, Faith Odhiambo, has sharply criticized the proposed Finance Bill 2026, warning that several of its provisions risk overburdening ordinary Kenyans, small businesses and investors while doing little to address deeper structural weaknesses in tax enforcement.

In a post on X (formerly Twitter ) following the publication of the Bill on April 30, Odhiambo acknowledged the government’s fiscal objectives — including the target to raise Ksh3.63 trillion in revenue and manage a budget deficit of 5.3% of GDP for the 2026/27 financial year — as reasonable in principle.

However, she argued that the burden of achieving those goals had been distributed unfairly.

“The issue is not merely revenue collection,” she stated. “It is whether the measures being proposed are equitable, sustainable and economically sensible.” Among the provisions drawing criticism is the proposal to shorten tax filing timelines.

The Bill seeks to move the income tax return deadline from June 30 to April 30, while compressing nil return filing to January 31.

According to Faith, the changes will increase compliance pressure on small businesses and individual traders who already struggle with audit completion and cash flow management.

She has also taken note of a proposed amendment which introduces a new Section 12H to the Income Tax Act targeting mitumba importers.

Under the proposal, traders would be required to pay a final tax equivalent to 5% of the customs value of imported goods before release by the Kenya Revenue Authority. Faith argued that the provision ignores commercial realities by taxing traders regardless of whether they eventually make profits or losses.

“A trader importing a bale worth Ksh1 million would pay Ksh50,000 upfront even before selling a single item,” she noted.

The former LSK President further criticised proposals to increase residential rental income tax from 7.5% to 10%, saying the government has failed to address enforcement gaps within the sector.

She warned that increasing rates without improving compliance systems could encourage tax evasion rather than expand revenue collection.

On digital finance, Odhiambo expressed concern over the removal of VAT exemptions on money transfers and payment processing services, arguing that the measures could undermine financial inclusion by making essential digital transactions more expensive for millions of Kenyans.

The Bill also proposes subjecting interchange and merchant service fees to withholding tax under management and professional fees, a move she says could introduce additional compliance costs into banking systems that would ultimately be passed on to consumers.

Another concern is the controversial proposal of the amendment to Section 24 of the Income Tax Act, which would empower KRA to deem at least 60% of a company’s undistributed income as taxable dividends.

Ms Odhiambo warned that the measure could discourage reinvestment and send negative signals to investors by penalising businesses seeking to retain earnings for expansion and working capital needs.

She has additionally questioned the proposed 25% excise duty on mobile phones, arguing that phones are no longer luxury items but essential tools for communication, banking, business and access to government services.

The absence of anticipated PAYE relief for salaried workers also emerged as a major concern in her remarks, with Odhiambo saying many Kenyans had expected restructuring of tax bands to ease pressure on employees amid rising living costs.

Despite her criticism, Faith acknowledged several positive measures within the Bill, including the reduction of corporate tax for non-resident companies from 37.5% to 30%, extension of the tax amnesty programme to December 31, 2025, and VAT exemptions on electric buses, bicycles, dialysis equipment and PPP infrastructure.

She also welcomed reforms clarifying trust taxation and exempting gratuity contributions from taxation. Even so, she cautioned Parliament against approving the Bill without rigorous scrutiny.

“We cannot afford a repeat of June 2024,” she warned.

Faith has urged lawmakers to carefully interrogate every clause in the Bill and reject provisions she described as punitive, ambiguous or harmful to ordinary citizens and businesses.