Kenya Revenue Authority (KRA) says it is currently losing about Sh100 billion in rental income as a result of landlords not willing to voluntarily pay taxes.
Adan Mohammed, the newly sworn in KRA commissioner general, told the National Assembly’s Finance and National Planning committee that the taxman currently collects Sh16 billion annually.
“We are looking at ways to reach many taxpayers. For Instance, rental income tax of 7.5 per cent is expected to generate Sh100 billion but today only Sh16 billion is collected annually because people are not willing to pay taxes and have devised ways to evade payment of taxes,” Mr Mohamed said.
“In other jurisdictions, tax authorities are intrusive to reach data and get people to pay their fair share of tax. We are exploring new ways to get many people to pay tax as we broaden the tax base. The answer to meeting revenue targets lies in reaching many people in paying smaller tax but as of now, we use rungu (club) and hammer to get the few people to pay tax.”
He said only 12,000 companies or 55 per cent of registered firms, and three million salaried workers pay tax in Kenya, and hence the need to spread and widen the tax base.
Mr Mohamed said the taxman is also losing Sh13 billion annually in smuggled phones and asked MPs not to scrap the 16 per cent value added tax (VAT) on imported cellular devices.
The KRA commissioner general said the country currently nets Sh2 billion in taxation of imported phones out of an annual estimated revenue target of Sh15 billion.
The Finance Bill, 2026 has proposed to cut the excise tax on imported mobile phones from a high of 53 per cent to 25 per cent with the Treasury proposing to drop the 16 percent VAT on imported cellular devices.
“The current situation is that we charge over 50 per cent tax on imported mobile phones in terms of customs duties, excise duty, VAT, Railway Development Levy (RDL), and Import Declaration Fee which has caused a lot of problems because the higher the tax on any item, the higher the risk of tax evasion,” Mr Mohamed said.
“It is difficult to deal with importers of these products because there is a disincentive to pay tax. The idea of paying tax on imported cellular devices at the point of entry is good. But the proposal to charge tax at the point of activation could help us net more revenue.”
The Bill proposes introducing a 25 percent excise duty on mobile phones with the Treasury defending the proposal saying it does not introduce a new tax on mobile phones but instead relieves Kenyans from existing tax burdens.
The Treasury principal Secretary Chris Kiptoo separately told the Finance and National Planning committee that mobile phones are currently subject to five domestic taxes and levies during importation and along the supply chain.
These include a 16 percent VAT, 10 per cent excise duty, 25 per cent import duty, 2.5 per cent Import Declaration Fee, and a 2 per cent Railway Development Levy.
The Treasury Cabinet Secretary John Mbadi had earlier said the 25 per cent excise duty proposed in the Finance Bill, 2026 will be a significant reduction from the current 55.5 per cent tariff on phone imports.
Cabinet Secretary for the National Treasury and Economic Planning John Mbadi displays his briefcase before reading the 2026/27 budget at Parliament Buildings, Nairobi, on Thursday, June 11, 2026.
Photo credit: DENNIS ONSONGO | NATION
"All that is 55.5 per cent, and when you put your phones in the stores, your liquidity is constrained. Now we do not want to tax any phone until it is sold, then you pay one tax, an excise duty of 25 per cent. That to me is the way to simplify tax," Mr Madi said during a public participation meeting at the Jevanjee Gardens in Nairobi.
The Bill seeks to amend Section 36 of the Excise Duty Act to require that a 25 per cent excise duty will be paid to the KRA at the time of the activation of the phone.
“Maybe we are cutting it too deep by removing everything including the 16 percent VAT on imported mobile phones,” Mr Mohamed told the committee chaired by Molo MP Kuria Kimani.
“We propose as KRA that you remove Import Duty, and Railway Development Levy but retain 16 percent VAT and Excise Duty.”
He said removing import duty pegged at the rate of 25 percent on mobile phones is the fight thing to do as this is the case with the East African Community (EAC) Common External Tariff.
“But VAT and Excise duty charged at the rate of 16 percent and 25 percent should be retained,” Mr Mohammed said.
Committee chairperson and Molo MP Kuria Kimani said the committee is struggling with the matter of charging tax at the point of activation arguing it will inconvenience mama mboga and boda boda operators.
National Assembly Finance and National Planning Committee chairperson Kuria Kimani.
Photo credit: File | Nation Media Group
“You will lose more tax than what you are trying to collect. I can import a phone and not activate it then sell it to Uganda or Tanzania because it has not been taxed at the port of entry,” Mr Kimani said.
“Today you get tax at the point of entry. If you let me get in high end phones and stock it, then get an order in Uganda, Tanzania or South Sudan, I will export without paying any tax.”
Mr Mohammed said there will be a white list that mobile service providers will use to check the IMEI numbers to ascertain whether tax has been paid on the phones prior to activation with a SIM card.
“You can import a high-end phone, keep it in your pocket and not pay tax at the point of entry. But when you activate, you will automatically be required to pay tax,” Mr Mohammed said.
