CS Mbadi Rules Out New Taxes in Finance Bill 2026 as Govt Targets KRA Efficiency

CS Mbadi Rules Out New Taxes in Finance Bill 2026 as Govt Targets KRA Efficiency

Kenya’s National Treasury has ruled out introducing new taxes in the upcoming Finance Bill for the 2026/2027 financial year, signalling a major policy shift as the government pivots toward improving revenue collection efficiency instead of imposing additional levies.

Appearing before the National Assembly’s Budget and Appropriations Committee on Thursday, March 26, Treasury Cabinet Secretary John Mbadi said the government would prioritise strengthening the performance of the Kenya Revenue Authority (KRA) to meet fiscal targets.

The session focused on deliberations over the 2025/2026 Supplementary Estimates, amid growing pressure on the government to stabilise public finances without overburdening taxpayers already grappling with a high cost of living.

“We are not planning to introduce new taxes in the next Finance Bill,” Mbadi told lawmakers, adding that the administration’s immediate priority is to expand compliance and plug revenue leakages across the economy.

Pressure on KRA to boost collections

Mbadi noted that KRA has been tasked with significantly improving enforcement, particularly in sectors where tax compliance remains low despite visible economic activity.

One area singled out was rental income, which Treasury officials say remains substantially underreported.

“The base has not expanded as we had expected despite the much hype,” he said, referring to earlier initiatives aimed at bringing more landlords into the tax net.

“That is why we are putting pressure on the KRA and undertaking institutional reforms which also extend to digitisation,” Mbadi added.

Officials believe that improved data systems, digital tracking, and inter-agency coordination could substantially raise revenue without altering tax rates.

Possible reforms if targets missed

The Cabinet Secretary warned that additional structural changes at KRA could follow if performance does not improve.

He cited a growing mismatch between the sophisticated digital capabilities of taxpayers and the tax authority’s ability to monitor and analyse transactions effectively.

Analysts say the comments underscore mounting expectations for the tax agency to deliver results at a time when public debt obligations and development spending continue to strain government finances.

Backlash from past tax measures

The decision to avoid new taxes comes after intense public opposition to previous Finance Bills, which introduced a series of levies that triggered widespread protests — many driven by younger Kenyans — in 2024 and 2025.

Those demonstrations highlighted public frustration with rising living costs, unemployment, and perceptions of fiscal mismanagement, forcing policymakers to reconsider their approach to revenue mobilisation.

Digital tracking of income streams

Parallel to the Treasury’s announcement, KRA has already begun rolling out stricter compliance measures using financial data analytics.

On March 25, Deputy Commissioner for Policy and Tax Division Maurice Oray said the authority is expanding monitoring of all income streams after detecting inconsistencies among some taxpayers, particularly those filing nil returns despite evidence of transactions.

The agency plans to rely heavily on financial data — including activity on platforms such as M-Pesa — to verify declarations.

A key feature of the reforms will be pre-filled tax returns, where known income sources are automatically captured in the system before submission.

Taxpayers will be required either to confirm the information or explain any discrepancies, a move officials say will simplify filing while discouraging underreporting.

Balancing revenue needs and public trust

Economists note that the government faces a delicate balancing act: raising sufficient revenue to fund services and debt repayments while avoiding measures that could dampen economic activity or spark renewed unrest.

By emphasising efficiency over new taxation, the Treasury appears to be responding to both economic realities and political sensitivities ahead of future electoral cycles.

For ordinary Kenyans, the shift means that while tax rates may remain unchanged, scrutiny of income sources is likely to intensify.

If successful, the strategy could broaden the tax base without increasing statutory burdens — but its effectiveness will depend largely on KRA’s ability to modernise systems, close loopholes, and maintain public confidence.

As Parliament prepares to debate the Finance Bill in the coming months, Mbadi’s assurance sets the tone for what could be one of the most closely watched fiscal policy decisions in recent years.

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CS Mbadi Rules Out New Taxes in Finance Bill 2026 as Govt Targets KRA Efficiency