What You Need to Know
Kenya’s private sector is advocating for policy predictability and tax reforms in the Finance Bill 2026. Key proposals include extending tax loss carry-forward periods, reinstating preferential corporate tax rates, and amending VAT regulations to enhance cash flow for businesses. These measures aim to stimulate economic growth and improve fiscal stability.
Africa-Press – Kenya. KENYA’s private sector has called for policy predictability as the Finance Bill, 2026 heads to Parliament, a key proposal that outlines how government seeks to raise revenue to fund its budget.
In a strategic meeting convened by the Kenya Private Sector Alliance (Kepsa) this week, the private sector presented and discussed its inputs on the Finance Bill 2026 to the National Assembly Departmental Committee on Finance and National Planning.
Key recommendations from the private sector included extending the period for carrying forward tax losses from five to ten years to support capital-intensive sectors.
Sector players also want the reinstatement of the 15 per cent preferential corporate tax rate for local motor vehicle assemblers and large-scale housing developers.
“We also call for an extension of the amnesty deadline by 24 months, to allow completion of Alternative Dispute Resolution (ADR) cases and boost voluntary compliance,” Kepsa’s public finance sector board chair, Rose Mwaura, said.
Furthermore, the private sector also proposed that the Third Schedule of the Income Tax Act be amended to ensure the highest PAYE tax band is 30 per cent (down from 35%) and increase relief to Sh3,000 (creating a 30,000 tax-free base).
According to the Kenya Bankers Association (KBA) chief finance officer Kennedy Mutisya, this will cushion low-income earners from the higher taxes and levies, and release Sh28.1 billion to workers, which will translate to higher spending power, create an estimated Sh42 billion GDP bump and at least 36,000 jobs.
It also proposed amending section 35 of the Income Tax Act to extend the remittance of withholding VAT tax to the 5th of the following month from the current five orking days after the deduction was made.
This will translate to ease of cash flow for businesses, thus widening operating capital that will translate to increased revenue and consequently income taxes and VAT,” Kepsa vice chairperson of the public finance sector board, Jilna Shah, said.
Additionally, the private sector is advocating for the zero-rating of essential agricultural inputs like biofertilisers, foliar feeds, and soil products or consider a lower VAT of five per cent.
“This will contribute greatly to Kenya’s food security and support the 2024 Nairobi Declaration on Africa Fertiliser and Soil Health,” said Steve Okoth, tax advisory director at BDO Kenya.
According to Kepsa, Kenya’s 2026 fiscal and policy environment is defined by a convergence of fiscal strain, energy constraints and regulatory instability, forming a “Triple Crisis” that is undermining economic performance.
“The Finance Bill 2026 presents an opportunity not just to assess fiscal numbers but to re-anchor Kenya’s policy direction toward stability, competitiveness and long-term growth,” Kepsa director James Mwangi said.
With a national budget of approximately Sh4.7 trillion and debt servicing consuming about 53 per cent of revenues, fiscal space for development has significantly narrowed.
This has contributed to the accumulation of pending bills estimated at Sh664.8 billion, which has weakened private sector liquidity, disrupted business operations, and slowed economic activity.
Efforts to increase revenue through taxation have also faced resistance and legal challenges, further complicating fiscal consolidation.
Speaking on behalf of the National Assembly Departmental Committee on Finance and National Planning chair, Kimani Kuria, Turkana South MP who is also a member of the committee, Ariko Namoit, recognised the emerging legislative landscape, particularly pending bills.
“As we turn to the Finance Bill, 2026, the Committee will be guided by the need to strike a careful balance between revenue mobilisation and economic growth,” he said.
“Sustainable fiscal policy must not only secure government resources, but also create an enabling environment for enterprises, innovation, and competitiveness.
Kenya’s economic landscape has faced significant challenges, including high debt servicing and regulatory instability, which have strained fiscal resources. The private sector’s push for reforms in the Finance Bill 2026 reflects a broader need for policy stability to foster growth and address the ‘Triple Crisis’ of fiscal strain, energy constraints, and regulatory issues. The recommendations aim to create a more favorable environment for business operations and economic recovery, essential for Kenya’s long-term growth.
