Four amendments the
Finance Bill 2026 still needs
A memorandum to the Departmental Committee on Finance and National Planning, on Article 118(1)(b) grounds
Kenya's Constitution, in Article 201, sets out the principles by which public finance is to be conducted: openness, accountability, equitable sharing, prudent and responsible use of public money, equitable development across counties and generations. Article 210 adds that no tax may be imposed except by an Act of Parliament, and that any such tax must be reasonable. The Public Finance Management Act, 2012, at Section 24, codifies these principles into a working framework that requires every revenue measure to be tested against them — not merely against the year's revenue target.
The Finance Bill 2026, now before the Departmental Committee on Finance and National Planning, ought to be measured by this standard. On Monday 25 May the formal public participation window closed; on Tuesday 26 May I submitted a two-page memorandum to the Committee Chair, Hon. Kuria Kimani, and to the Clerk of the National Assembly, raising four specific amendments. What follows is the substance of that memorandum, now offered to a wider readership of operators, professionals, and policy interlocutors who have a stake in how this Bill becomes law.
I.The operator's vantage
I write from a perspective that straddles two sides of Kenya's agri-economy. Sinonin Biotech GmbH, the company I founded in Germany, works on alternative proteins for petfood formulation — the very category of feedstock the Finance Bill addresses. In Nandi County, Sinonin Tea and Kipkenda Poultry place me on the receiving end of every input price that crosses the Mombasa port and every withholding tax that the Kenya Revenue Authority assesses on rural enterprise. I am not writing about agri-processing from the seminar room. I am writing about it from the weighing shed.
That position imposes both an obligation and a constraint. The obligation is to speak plainly when I believe the Bill has erred; the constraint is to do so within the discipline of constitutional and public-finance principle, not from grievance.
II.Zero-rating, not exemption
The Bill proposes to add the inputs and raw materials used in the manufacture of animal feeds to the Second Schedule of the Value Added Tax Act, Cap 476 — that is, to the schedule of exempt supplies. To the casual reader this looks like relief. It is in fact a hidden tax.
Under Sections 17 and 43 of the VAT Act, the supplier of an exempt good cannot reclaim the input VAT it incurs upstream. The sixteen per cent VAT on imported pre-mixes, enzymes, packaging and raw materials therefore does not disappear when the final good is exempted; it embeds itself in the selling price of every bag of feed that leaves the factory gate, and from there it embeds itself in the price of every kilogram of poultry, fish, dairy and egg that the small farmer brings to market. The National Treasury's own Tax Expenditure Report (2024) documents this cascade. The relief is illusory; the cost falls heaviest on the smallholder, who has no input-tax claim to lodge.
The exempt classification looks like relief. It is in fact a hidden tax that falls heaviest on the smallholder.
The technical correction is straightforward. Move animal-feed inputs from the Second Schedule (exempt) to the First Schedule, Part A (zero-rated) of the Value Added Tax Act. A zero-rated supplier reclaims its input VAT; the chain remains clean; the relief reaches the farmer it was intended to reach.
Two further refinements matter. The schedule should name expressly the alternative-protein feedstock category — insect-based proteins, single-cell proteins, hydrolysates, plant-protein concentrates — rather than defer their listing to the Cabinet Secretary's discretion by gazettement. Discretionary listing has historically delayed Kenya's entry into emerging feed-protein markets where Singapore, the Netherlands and Rwanda are already operating at industrial scale. And the ninety-day VAT refund offset announced by the Cabinet Secretary in January should be enacted by direct amendment of Section 47 of the Tax Procedures Act, 2015, not deferred to subsidiary legislation. The predictability principle in Article 201(d) of the Constitution demands that important administrative remedies be written into the Act itself.
III.A First-Employment Tax Rebate
The Bill is silent on direct employment incentives, even as the Treasury continues to identify rural industrialisation as a strategic priority. The omission ought to be repaired.
I propose a First-Employment Tax Rebate: a fifty per cent PAYE remittance credit, payable for thirty-six months, in respect of every employee aged below twenty-five entering their first formal employment with the taxpayer, capped at twenty such employees per employer per annum. The architecture is not novel. South Africa's Employment Tax Incentive Act of 2013 and the United Kingdom's Employment Allowance have both been independently evaluated as net revenue-positive within four years, because the workers brought into the formal tax net through the incentive — the cooks, drivers, packers, junior accounts clerks — file PAYE, contribute to social security, and become tax residents in a way the informal sector never makes possible.
The anchor would be amendment of the Third Schedule, Head B, of the Income Tax Act, Cap 470, with a sunset clause at five years and a mandatory annual Tax Expenditure Statement filed under Section 75 of the Public Finance Management Act. The Treasury must report annually on uptake and revenue cost; Parliament must in turn assess whether the formalisation effect has materialised. This is what fiscal responsibility under Article 201 actually looks like in practice — incentives that are time-bound, measurable, and accountable to public scrutiny.
IV.A TVET Graduate Enterprise Tax Holiday
Kenya certifies approximately 280,000 graduates from its technical and vocational education and training institutions every year. The absorption rate of those graduates into formal wage employment is below thirty per cent. The remainder enter the informal economy or emigrate. The Finance Bill ought to address this directly.
I have elsewhere outlined the broader policy architecture of what I term the Graduate Enterprise Launchpad. Within the tax architecture, the specific intervention I propose is a TVET Graduate Enterprise Tax Holiday: a corporate income tax exemption for the first thirty-six months of operation, together with an exemption from turnover tax for the same period, for enterprises in which not less than fifty-one per cent of the issued shares are held by holders of valid TVET qualifications issued under the TVET Act, No. 29 of 2013, and certified within the preceding sixty months. The Stamp Duty Act, Cap 480, should be amended to waive stamp duty on the first registration of such enterprises.
Eligibility verification is administratively simple. Cross-reference against the TVET Authority's national graduate register removes the abuse risk that has been cited in past tax-incentive evaluations. The anchor is amendment of the Second Schedule of the Income Tax Act, Cap 470, with mandatory annual reporting to Parliament on uptake and revenue cost. The political appeal is obvious; the fiscal cost, given the low base from which TVET-graduate enterprises currently start, is modest; the formalisation gain is real.
V.Healthcare financing
The Social Health Insurance Act, 2023, established the statutory floor for Kenyan healthcare financing. Long-term sufficiency, however, depends on contributions above that floor, and the Bill should expressly provide for two measures to that end.
First, the Income Tax Act should permit full deductibility under Section 15 of employer-funded medical cover above the statutory SHA contribution, without imposition of Fringe Benefits Tax under Section 12B, provided the cover is extended uniformly to all permanent employees of the taxpayer. Second, the Bill should introduce a Rural Health Infrastructure Investment Allowance of one hundred and fifty per cent on the cost of constructing or substantially upgrading clinical or diagnostic facilities in counties outside the Nairobi Metropolitan area, Mombasa, Kisumu and Nakuru. The architecture mirrors the existing Industrial Building Allowance under the Second Schedule of the Income Tax Act, and is administratively simple. The fiscal cost is offset, on conservative modelling, by reduced National Treasury counterpart funding to county Level 4 and Level 5 facilities under the conditional grants framework.
The fiscal accounting
None of the four amendments proposed here is a fiscal subtraction. The agri-processing correction is revenue-neutral by VAT design — the cascade cost is replaced by transparent zero-rating, which the Bill in any event purports to effect. The First-Employment Rebate and the TVET Graduate Holiday are tax expenditures whose revenue cost is recoverable within four to five years through base broadening, and both ought to be accompanied by mandatory Tax Expenditure Statements under Section 75 of the Public Finance Management Act. The healthcare provisions substitute private capital for public conditional grants.
Each amendment is anchored on the Article 201 principles — openness, accountability, equitable sharing, and prudent use of public money — and conforms to the requirement under Article 210 that the imposition or relief of tax be reasonable, predictable, and supported by legislative authority.
The window for principled intervention is narrower than it was a week ago. It is not yet shut.
The formal memoranda window has closed, but the Bill is not yet law. The Committee report goes to Second Reading; amendments may still be moved in Committee of the Whole House before the Bill is presented for assent on or before 30 June. The window for principled intervention is narrower than it was a week ago. It is not yet shut.
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