By Jameson Mutua
The Kenya Private Sector Alliance (KEPSA), together with leading business membership organisations, has urged Parliament to revise key proposals in the Finance Bill 2026, warning that excessive taxation could undermine economic growth, job creation and Kenya’s competitiveness in the region.
Speaking during a press briefing held jointly with the Kenya Bankers Association (KBA) on Monday, KEPSA said the country must shift from what it termed as “taxing for survival” to a sustainable framework of “taxing for growth.”
The private sector lobby presented a consolidated memorandum to the National Assembly Departmental Committee on Finance and National Planning, representing the interests of more than two million businesses across different sectors of the economy.
KEPSA Chairperson Jas Bedi said while the private sector supports the government’s Bottom-Up Economic Transformation Agenda (BETA), fiscal reforms must balance revenue mobilisation with private sector competitiveness.
“The Finance Bill 2026 comes at a critical time for Kenya’s economy. Structural economic stability demands an intentional balance between aggressive domestic revenue mobilisation and preservation of private sector competitiveness,” said Dr. Bedi.
According to KEPSA, data from the latest Kenya National Bureau of Statistics Economic Survey shows deep structural weaknesses in the economy, with the formal sector accounting for only 16.2 percent of total employment compared to 83.8 percent in the informal sector.
The alliance argued that increasing taxes on the shrinking formal sector would only suppress investment and economic expansion further. Instead, KEPSA proposed reforms anchored on enhancing regional competitiveness, protecting jobs and simplifying tax compliance to encourage more informal businesses to formalise.
Among the key proposals presented was a call to reduce the maximum Pay As You Earn (PAYE) tax rate from 35 percent to 30 percent while increasing monthly personal relief to KSh3,000.
KBA Chief Executive Officer Raimond Molenje said the proposal would restore workers’ purchasing power and stimulate economic activity.
“This 5 percent relief would inject KSh28.1 billion back to workers, boosting household spending, increasing indirect tax collection and supporting GDP growth,” said Molenje.
KEPSA also strongly opposed proposals to introduce a 16 percent VAT on digital payment processing and expand withholding tax on card network interchange fees, arguing that such measures would increase transaction costs and reverse gains made in financial inclusion.
The alliance warned that the proposed amendments could make digital payment systems financially unsustainable and drive businesses back to cash transactions, contrary to Kenya’s National Payment Strategy.
Manufacturers and exporters also raised concerns over new excise duties and VAT changes affecting sectors such as agriculture, aviation and e-mobility.
KEPSA noted that introducing excise duty on unbleached Kraft paper would significantly increase agricultural packaging costs and hurt Kenya’s fresh produce exports, while removing VAT exemptions on aircraft parts and electric mobility products could weaken Kenya’s regional aviation and green economy ambitions.
The business community further criticised proposed amendments to the Tax Procedures Act that would allow the Kenya Revenue Authority to freeze bank accounts and issue agency notices even when tax disputes are under active appeal in court.
KEPSA argued that the move would violate constitutional protections on fair hearing and due process by draining businesses of liquidity before cases are concluded.
The alliance also called for reforms to the iTax system to enable automatic offsetting of overpaid tax credits against liabilities such as PAYE, VAT and withholding tax.
Dr. Bedi urged Parliament to ensure the Finance Bill 2026 supports industrialisation and job creation rather than creating additional barriers for businesses.
“By refining these clauses, removing unclaimable input burdens and maintaining statutory safe harbours, we can secure Kenya’s position as the competitive heart of the East African Community,” he said.
Business organisations represented at the press conference included the Kenya Association of Manufacturers, Shippers Council of Eastern Africa, Pharmaceutical Society of Kenya, British Chamber of Commerce Kenya, Kenya Association of Air Operators, Retail Trade Association of Kenya, Kenya Flower Council and the Kenya Association of Women in Tourism.
