Explainer: Why the govt wants to change how phones are taxed

Kenyans worried that the Finance Bill 2026 will make smartphones more expensive may end up paying less under the government’s proposed tax changes, according to clarifications released alongside the Bill.

The Treasury says the proposal is not introducing a fresh layer of taxes on phones, but restructuring how mobile devices are taxed.

Currently, imported phones attract several charges, including VAT, Import Declaration Fee (IDF) and Railway Development Levy (RDL). Under the proposal, these taxes would be scrapped and replaced with a single excise duty framework.

The clarification comes after widespread concern online that smartphones would now face excise duty similar to products such as alcohol and cigarettes.

The government argues that excise duty is no longer used only as a “sin tax,” saying modern tax systems also use it to generate revenue, influence consumption and fund infrastructure.

So, will phones become more expensive?

The National Treasury says no.

According to the government, the proposed system is meant to replace multiple existing taxes rather than add a new one on top of them. Treasury CS John Mbadi is a recent public address argued that this could lower the overall cost of mobile phones.

The government considers smartphones as “high-penetration, high-utility devices” within Kenya’s digital economy, making them a stable source of tax revenue without necessarily classifying them as harmful products.

However, the final impact on retail prices will depend on the excise rate adopted by Parliament and how importers pass costs to consumers.

One of the most controversial parts of the proposal is the “point of activation” rule, which sparked fears that users could be taxed whenever they insert a new SIM card into a phone.

Critics also raised concerns about double taxation, especially for second-hand phones and devices that had already been taxed at importation.

In response, the government says the Communications Authority of Kenya will develop regulations to prevent double taxation and address issues affecting tourists, short-term visitors and second-hand devices.

The National Treasury says the aim is to create a “clear, predictable and enforceable system” by consolidating taxes into a single framework.

Another concern raised by Kenyans is whether phone activation tracking could give the government access to personal user data or enable surveillance.

The Treasury denies this.

Officials say the system is intended for tax compliance and efficiency, not monitoring users, adding that safeguards are expected to be included in future regulations and that Kenya’s existing data protection laws will still apply.

The Finance Bill 2026 also states that there is no proposal giving tax authorities direct access to personal mobile money transaction data.

The proposal touches one of the most widely used technologies in Kenya.

Smartphones are central to mobile banking, online work, digital lending, e-commerce and government services. Any increase in prices could affect digital access, especially for low-income users.

The government says the new structure is designed to protect entry-level devices and avoid pushing Kenyans away from digital services and back to cash transactions.

Still, economists and consumer groups are likely to closely scrutinise whether the final tax structure genuinely reduces costs or simply shifts how taxes are collected.

Parliament is expected to debate the Finance Bill 2026 in the coming weeks before any changes take effect.