Nairobi — A tax expert has warned that proposals in the Finance Bill 2026 to impose value-added tax on digital payment platforms could reverse years of progress in financial inclusion and digital commerce by discouraging the use of mobile money services such as M-Pesa.
Kiema Onesmus, KPMG East Africa Associate Director for Tax and Regulatory Services, said the proposed taxation of transaction charges risks pushing Kenyans back toward cash-based transactions at a time when the country has become a global model for mobile money adoption.
Speaking during an interview on the proposed Finance Bill 2026, Onesmus argued that the government's revenue-raising agenda was increasingly focused on aggressive taxation measures rather than policies designed to stimulate economic growth and ease the cost of living.
"The proposals, if they sail through as they are, will set us back way more -- almost like a thousand steps," Onesmus said while discussing the planned 16 percent VAT on fees earned by digital payment platforms.
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He noted that Kenya's mobile money ecosystem has transformed daily commerce, allowing users to pay matatu fares, settle bills, transact with small businesses and send money without relying on cash.
"Nowadays it's very easy for you to go to a mama mboga and pay using M-Pesa. It's very easy for you to board a matatu and pay your fare using M-Pesa," he said.
According to Treasury proposals, the VAT would apply to commissions and service fees earned by operators of Kenya's digital payment platforms rather than directly targeting consumer transfers.
However, Onesmus cautioned that operators were likely to pass the additional costs on to customers.
Cash transactions
He warned that higher transaction costs could discourage the use of digital platforms and undermine Kenya's internationally recognised success in expanding financial inclusion through mobile money technology.
"What I'm foreseeing happening is us going back to instances where people would have money stuck underneath their mattresses, people shying away from wanting to pay on any platform," he said.
Onesmus linked the proposal to a recent Supreme Court ruling involving transaction charges, where the court held that certain interchange fees should not be subjected to tax.
He argued that the Finance Bill appeared to be attempting to reintroduce taxation through legislative changes following the legal setback.
Beyond digital payments, Onesmus criticised several other provisions in the Finance Bill, saying most proposals were designed primarily to raise revenue rather than cushion households or stimulate economic activity.
He pointed to proposals affecting electric vehicles, digital devices and business taxation as examples of measures that could increase costs for consumers and businesses.
Among the concerns raised were proposals to reclassify electric vehicles from zero-rated to VAT-exempt status, a move he said would ultimately increase prices because manufacturers would no longer recover input VAT costs.
Heafty charge on smartphones
He also warned that a proposed 25 per cent excise duty on mobile phones could make digital access more expensive for young Kenyans who increasingly rely on smartphones for work, education and entrepreneurship.
"A phone is more than just what it used to be traditionally. It's now an office where young people can do business, transactions, writing and research," he said.
The tax expert further expressed concern over provisions granting the Kenya Revenue Authority expanded access to taxpayer financial data, saying the measures could erode public trust and expose ordinary Kenyans to intrusive scrutiny.
He argued that many informal transactions, such as chama contributions or community fundraising, could be misinterpreted as taxable income if authorities gain unrestricted access to personal mobile money records.
Onesmus also questioned the government's broader fiscal strategy, warning that Kenya risks "taxing itself to prosperity," borrowing a phrase from former British Prime Minister Winston Churchill.
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"The same businesses and the same people are being taxed year after year. There's never enough," he said.
Treasury is seeking to raise an additional Sh120 billion through the Finance Bill 2026 as part of a broader target to increase tax revenue collection from Sh2.7 trillion to Sh2.9 trillion in the next financial year.
However, Onesmus said the targets appeared unrealistic given current economic pressures, rising living costs and slowing consumer spending.
"I don't see anything unique in this bill," he said. "All I'm seeing are revenue-raising measures instead of economic stabilisation triggers and economic growth stimulators."
He instead urged the government to focus on tax incentives capable of attracting investment, expanding manufacturing and creating jobs.
"For me, I would give more tax incentives because it is incentives that actually attract investors into our country," he said.
The Finance Bill 2026 is currently undergoing public participation before being debated in Parliament.
