What's happened
COFEK has argued that the Finance Bill 2026 introduces a “hidden digital taxation” with retrogressive VAT changes and broadened tax powers that would burden consumers and small businesses. They warn that redefining royalty and management fees to cover digital payments could impose withholding taxes on digital transactions, affecting interchange and merchant charges. The lobby is calling for a 12‑month transition and restoration of zero-rated basic goods, while criticizing a 20% withholding on gambling winnings and a 25% excise on mobile phones activated on Kenyan networks. They also warn this could breach EAC rules and privacy safeguards in the virtual assets framework. Parliament is now reviewing submissions ahead of the third reading.
What's behind the headline?
analysis
- COFEK argues the bill creates a hidden tax by redefining digital transaction charges as withholding taxes, potentially raising costs for consumers and small businesses.
- Proposals to remove zero-rating on essential goods and tax digital devices aim to rationalize revenue but risk price pressures and constitutional challenges.
- The 20% withholding on gambling winnings and 25% excise on mobile phones activated on Kenyan networks are highlighted as especially burdensome.
- Critics warn these measures could conflict with EAC commitments and data privacy safeguards in the new reporting regime for virtual assets.
- The outcome will hinge on regulatory impact assessments and Parliament’s willingness to push back on provisions deemed retrogressive.
How we got here
Public input on the Finance Bill 2026 has closed, with MPs examining proposals amid concerns from COFEK about retrogressive measures, potential price rises, and privacy issues in new reporting requirements for virtual assets. The bill seeks to simplify and broaden tax collection on digital and consumer goods as part of broader fiscal reforms.
Our analysis
All Africa reports on COFEK's submissions to Parliament, highlighting concerns over retrogressive VAT, broadened tax powers, and the digital asset reporting framework. Parliament is reviewing proposals ahead of the third reading.
Go deeper
- What changes will Parliament approve or reject in the Finance Bill 2026?
- Will there be a transition period for zero-rating and how will it affect essential goods?
- How might privacy safeguards be strengthened in the virtual-asset reporting framework?