The Institute of Certified Public Accountants of Kenya (ICPAK), has urged the National Assembly to strike a balance between short-term fiscal stabilization and long-term economic growth during its review of the Finance Bill 2026.
Appearing before the Departmental Committee on Finance and National Planning in the National Assembly, the accountants’ lobby warned that while the Bill contains fewer tax increases, several proposals could undermine Kenya’s digital economy and manufacturing competitiveness.
Concerns Over Digital Economy Tax Proposals
Key among ICPAK’s concerns is the proposal to expand the definition of management or professional fees to include transaction-related charges such as card interchange and merchant service fees.
The body warned that imposing withholding tax on card payments would raise transaction costs and discourage electronic payments, undermining the government’s push for a cashless economy and financial inclusion.
ICPAK also rejected proposals to tax software distribution, arguing that such measures would increase costs for innovation and digital infrastructure, contrary to international tax standards under the OECD framework.
Manufacturing Sector Competitiveness and Tax Relief Proposals
ICPAK noted that Kenya’s manufacturing sector contributes 7.1 per cent of GDP and 11.7 per cent of formal employment, but uneven growth patterns highlight structural weaknesses in key industries.
They proposed tax reliefs, including lower import duties and a reduction of the Import Declaration Fee and Railway Development Levy to 1.5 per cent on industrial inputs to reduce production costs.
However, Committee members cautioned that past incentives had been abused by traders misdeclaring finished goods as raw materials, calling for tighter enforcement and monitoring.
Kuria Kimani, Chairperson of the Committee, said all submissions would be carefully considered to ensure the Bill achieves a balance between revenue needs and economic growth.
Kenya’s fiscal position remains under pressure, with public debt rising 11.7 per cent to KSh 11.8 trillion, equivalent to 67.8 per cent of GDP, according to the National Treasury, International Monetary Fund, and Kenya National Bureau of Statistics data.
ICPAK further noted that while Kenya’s tax-to-GDP ratio is projected at 13.7 per cent, it remains below the IMF estimate of 25 per cent potential, indicating significant fiscal space constraints.
The Kenya Revenue Authority surpassed KSh 2 trillion in the third quarter, supported by digital tax systems and enhanced compliance measures.
ICPAK called for improved public participation tracking and greater transparency in stakeholder views incorporated budget.
