Kenya's Finance Bill 2026, tabled on 13 May, has proposed a 25% excise duty on mobile phones, a measure that has triggered one of the most heated public debates in the country's recent tax history. For a nation that has spent the better part of a decade building one of Africa's most connected digital economies, the timing has raised serious concerns among technologists, retailers, and consumer advocates.

Kenya currently has 73.2 million active mobile devices on its network, with smartphone penetration surpassing 80% by the end of 2025. Much of that growth has been driven by affordable Android handsets and pay-as-you-go financing schemes from M-Kopa, Watu Simu, and Safaricom's Lipa Pole Pole that have brought smartphones within reach of low-income households. The proposed tax threatens to reverse that momentum.

What the Government Says

Treasury Cabinet Secretary John Mbadi has pushed back firmly against the public outcry, arguing that the 25% excise duty does not represent a new tax burden but a consolidation of existing ones. Under the current regime, a phone entering Kenya attracts import declaration fees, railway development levies, 16% VAT, and customs duties that together push the cumulative tax incidence to approximately 55%. Mbadi's position is that replacing all of those with a single 25% levy, collected at the point of device activation rather than importation, actually reduces the overall burden on consumers.

Critics argue the maths does not hold up in practice. Analysts at the Serrari Group estimate that a basic smartphone currently retailing at KSh 10,000 could cost over KSh 12,500 under the new structure before additional dealer margins. For a household where that smartphone is the primary tool for mobile banking, remote work, and digital government services, a 25% price increase is not a rounding error.


The Grey Market Risk

The deeper concern is structural. When Kenya removed VAT exemptions on phones in 2013, prices spiked and grey market imports accelerated. The tax raised less revenue than projected while pushing consumers out of formal retail channels. Analysts warn the Finance Bill 2026 risks repeating exactly that cycle: raise costs in the formal market, drive consumers toward informal alternatives, collect less than expected, then introduce further measures to compensate.

The Finance Bill 2026 is currently before Kenya's National Assembly for public participation. The smartphone tax debate is likely to be among its most contested provisions.