In what appears as a move to appease disgruntled citizens, National Treasury and Economic Planning Cabinet Secretary John Mbadi presented the 2026/27 budget proposal promising to shelve tax increases which would burden consumers.
In the three hour long budget statement, Mbadi proposed reforms in the country’s tax administration that is expected to improve revenue collection and broaden the tax base to fund the Ksh 4.8 trillion budget for the next fiscal year beginning July 1, 2026.
In a bid to raise additional taxes from the thriving betting industry, Mbadi proposed to legislators an amendment to the Income Tax Act which now introduces 20pc withholding tax on winnings arising from lotteries and prize competition.
“Gambling activities have grown significantly in recent years, particularly through digital platforms. While these are legitimate activities, winnings from gambling are income, and like any other income, they should be taxed. The Bill, therefore, proposes to introduce withholding tax on winnings, lotteries and prize competitions,” said Mbadi when he presented the Budget Statement on Thursday.
Scrap metal dealers who were previously not paying taxes on their earnings from scrap metal sales have also been brought within the taxman purview.
If the proposals on the Income Tax Act are adopted, scrap metal dealers will pay withholding tax on sales.
“To improve traceability of transactions and strengthen compliance for scrap metal trade, the Bill proposes to introduce a withholding tax on incomes earned from the sale of scrap metal at a low rate of 1.5pc of the gross amount paid,” Mbadi stated.
Other losers on the coming fiscal year will be manufacturers of sweetened beverages who will now pay excise duty on sugar sweetened beverages from Ksh 14.14 to Ksh 20 per litre to support public health objectives.
Manufacturers and importers of plastics will also be required to pay a 10pc excise duty on the products in a move treasury says will help promote environmental sustainability and ensure equitable tax treatment across the sector.
Treasury is also proposing to unleash the taxman on companies holding back their profits indefinitely simply to defer paying dividend tax, a loophole the government seeks to seal.
“In order to provide greater certainty in the application of the deemed dividend provisions and discourage indefinite retention of profits solely for purposes of deferring dividend taxation, the Bill proposes to introduce a minimum deemed dividend distribution threshold of 60pc of undistributed income,” added Mbadi.
In the 2026/27 fiscal year, the Treasury projects to collect Ksh 3.6 trillion in revenue and Ksh 43.6 billion from grants.
The deficit is projected at Ksh 1.15 trillion shillings out of which Ksh 1.03 trillion will be raised in the domestic market while Ksh 116.2 billion from foreign sources.
