Finance Bill 2026 proposals churches want Parliament to change

The Evangelical Alliance of Kenya (EAK) has urged Parliament to amend several provisions in the Finance Bill 2026, warning that some of the proposed tax measures could increase the cost of living, hurt small businesses and undermine digital inclusion.

In a memorandum presented to the National Assembly's Finance and Planning Committee on Friday, May 29, the faith-based umbrella body said while it supports the government's efforts to raise revenue, taxation should not come at the expense of ordinary Kenyans.

EAK, which represents more than 700 evangelical denominations and Christian organisations across the country, praised several proposals in the Bill, including the tax amnesty programme, pre-populated tax returns, incentives for Real Estate Investment Trusts (REITs), and measures aimed at broadening the tax base rather than introducing new headline tax increases.

However, the organisation raised concerns over a number of proposed tax changes that it said could place additional pressure on households and businesses.

Among the measures opposed by EAK is the proposal to increase residential rental income tax from 7.5 per cent to 10 per cent. The alliance warned that landlords could pass the additional cost to tenants, resulting in higher housing costs.

"Target non-compliance, not blanket escalation," the memorandum states.

The religious organisation also expressed concern over proposals affecting digital payments and mobile devices, arguing that they could make digital transactions more expensive and undermine efforts to expand access to technology.

EAK particularly opposed the proposed 25 per cent excise duty on mobile phones, describing smartphones as essential tools for young people earning a living through the digital economy.

"A smartphone is a tool of trade for a freelancer; taxing it at 25 per cent is effectively a tax on a youth's office equipment," the alliance said. 

Instead, it recommended increasing the exemption threshold for low-cost smartphones from Sh8,000 to Sh20,000 and shifting the excise duty collection point from phone activation to importation.

The alliance further urged Parliament to retain the zero-rated status of animal feeds and pharmaceutical inputs, arguing that changing them to VAT-exempt goods would increase production costs and ultimately push up prices for consumers.

According to EAK, the proposed reclassification could lead to higher prices for milk, eggs, meat and essential medicines because manufacturers would no longer be able to recover VAT paid on inputs.

The organisation also opposed provisions it said could create cash flow challenges for businesses, including changes affecting VAT refunds on bad debts and restrictions on the use of tax credits to offset import VAT obligations.

On tax administration, EAK warned that shortening income tax filing deadlines and introducing broader electronic tax invoice requirements could expose small businesses and informal traders to penalties without adequate public awareness.

It called for a 12-month tax literacy and systems integration period before enforcement of new digital compliance requirements.

Beyond specific tax proposals, the alliance criticised the technical nature of the Finance Bill, saying it limits meaningful public participation.

The organisation urged the National Treasury and Parliament to publish a simplified citizen-friendly version of future Finance Bills to help Kenyans understand proposed changes and their likely impact.

"In light of the protests regarding the Finance Bill in 2024, there remains a trust deficit between the government and the public," EAK said.

The memorandum also called for reforms to betting taxation, protection of faith-based and charitable organisations from excessive taxation, and measures to support informal sector workers including farmers, boda boda operators and small-scale traders.

While acknowledging the government's need to raise revenue for development, recurrent expenditure and debt obligations, EAK argued that Kenya's tax system may have reached a point of diminishing returns.

The alliance urged the government to focus on expanding the economy and improving tax compliance rather than imposing additional burdens on existing taxpayers.

In its concluding remarks, EAK linked the country's fiscal challenges to corruption and public sector inefficiency, arguing that billions of shillings continue to be lost through procurement irregularities, inflated contracts and misuse of public funds.

"Corruption is a cancer. If we do not cut it out decisively, it will continue to kill our dreams as a nation," said EAK General Secretary Rev. Kepha Nyandega.

The Finance Bill 2026 is currently before the National Assembly's Finance and Planning Committee, which is receiving public submissions before making recommendations to Parliament.