Nairobi — The Consumers Federation of Kenya (COFEK) has warned that several proposals in the Finance Bill 2026 could significantly raise the cost of living, weaken consumer protections and expose Kenya to regional trade disputes, as Parliament continues scrutiny of the tax measures ahead of the Third Reading.
In consolidated submissions to the National Assembly’s Finance and Planning Committee, COFEK said the Bill introduces “hidden digital taxation,” retrogressive VAT changes and expanded tax enforcement powers that could disproportionately burden ordinary consumers and small businesses.
The lobby argues that the proposed expansion of the definitions of “royalty” and “management fee” to include payments linked to digital payment systems, switching platforms and card networks would effectively impose withholding taxes on digital transactions, costs that financial institutions are likely to pass on to consumers through higher transaction charges.
“Banks and payment processors will pass withholding tax costs downstream through higher interchange rates and merchant service charges, ultimately borne by Kenyan consumers on every digital transaction.”
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“This is a hidden tax with no transparency mechanism, contrary to Article 46(1)(b) of the Constitution.”
COFEK also raised concerns over proposed VAT amendments that would delete several zero-rated categories under the VAT Act, warning that the move could increase prices of essential goods if implemented without safeguards.
The consumer lobby said the changes risk violating the constitutional principle against retrogressive measures on economic and social rights under Article 43, particularly if the affected items include foodstuffs, health products or educational materials.
The organisation is seeking a 12-month transition period before any zero-rated goods are converted to standard-rated supplies and wants Parliament to restore zero-rating on basic consumer goods.
The submission further criticised a proposal to impose a 20 percent withholding tax on gambling winnings, describing it as one of the highest rates globally when combined with existing betting levies and excise taxes.
COFEK also faulted the proposed 25 percent excise duty on mobile phones activated on Kenyan networks, saying the measure could offset gains expected from a simultaneous VAT exemption on handsets aimed at supporting digital inclusion.
Beyond consumer taxes, the organisation warned that the Bill could place Kenya at risk of breaching its obligations under the East African Community Customs Union Protocol after the proposed removal of rules-of-origin exclusions on more than 33 excise duty tariff lines affecting goods from EAC partner states.
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The lobby expressed concern over new tax procedures targeting virtual asset service providers, saying the reporting framework grants sweeping access to financial data without adequate safeguards on privacy, data minimisation or oversight.
COFEK has urged lawmakers to suspend contentious provisions pending fresh regulatory impact assessments, wider public participation and consultations with regional bodies and the Office of the Data Protection Commissioner.
Parliament had yesterday closed the window for public input into the 2026 Finance Bill with MPs currently combing through the submitted proposals ahead of the third reading.
