National Treasury Pledges No Tax Rate Hikes In Finance Bill 2026 As Government Shifts Focus To Automation And Base Expansion

Treasury CS John Mbadi assures Parliament that Finance Bill 2026 will not raise tax rates, focusing instead on KRA automation and expanding the VAT base.

By: AXL Media

Published: Mar 27, 2026, 4:56 AM EDT

Source: The information in this article was sourced from TUKO.co.ke

A Shift from Rate Hikes to Systemic Efficiency

In a significant policy briefing before the National Assembly's Budget and Appropriations Committee on Thursday, March 26, 2026, Treasury Cabinet Secretary John Mbadi announced a "zero new tax" stance for the 2026/2027 financial year. Acknowledging the civil unrest triggered by the 2024 tax proposals, Mbadi emphasized that the current economic climate does not permit further pressure on Kenyan taxpayers. "Kenyans are the same, and the rates are still the same. We are looking at the possibility of expanding the base," Mbadi informed lawmakers, signaling a pivot toward administrative reform over legislative tax hikes.

The Automation Mandate for KRA

Central to the Treasury’s strategy is the complete modernization of the Kenya Revenue Authority. Mbadi expressed concern that despite a transition toward digital business, manual collection methods persist within the agency. The government intends to push the KRA to fully adapt to automated revenue collection systems to plug leakages and improve the performance rate of domestic taxes. The CS noted that while the revenue base has not grown at the expected pace, systemic reforms are "necessary and non-negotiable" to fund public expenditure without raising existing rates.

Targeting the "Missing Middle": Small Business VAT Reforms

While rates may remain static, the net is set to widen significantly. The KRA is proposing a critical amendment to Section 34(1)(a) of the VAT Act, which currently exempts businesses with an annual turnover of less than KSh 5 million from VAT registration. By removing this threshold, the government seeks to mandate that all businesses, regardless of size, register as VAT agents. This move is expected to bring thousands of small and micro-enterprises into the formal tax bracket, though critics warn it could increase the administrative burden on small firms and lead to a marginal rise in the cost of local goods.