Kenyans could soon pay more for second-hand clothes, shoes and mobile phones if proposed tax changes in the Finance Bill 2026 are approved by Parliament.

The draft law, presented by National Treasury Cabinet Secretary John Mbadi, introduces new taxes targeting mitumba imports and communication devices as the government seeks to raise revenue for the Ksh4.8 trillion 2026/27 budget.

The proposed measures are expected to take effect in July 2026 if lawmakers pass the Bill.

One of the biggest proposals in the Finance Bill 2026 is the introduction of a presumptive tax on imported second-hand goods, including clothes, shoes and other used household items classified under tariff heading 6309.

Under the proposal, importers will pay a five per cent tax based on the value of goods at the point of importation before consignments are released from ports or border points.

The Bill introduces Section 12H into the Income Tax Act, making the tax mandatory for traders dealing in used goods.

“Notwithstanding any other provision of this Act, tax shall be payable by any person in respect of income derived from the importation into Kenya of used clothing, used footwear, and other used goods classified under tariff heading 6309,” the Bill states.

The government says the move is aimed at simplifying tax collection and reducing widespread tax evasion in the mitumba trade.

Unlike the current system, where traders may be required to file several tax returns and comply with multiple obligations, the proposed framework creates a single unified tax payable upfront.

The Treasury argue that this will make compliance easier for traders while helping the Kenya Revenue Authority (KRA) collect taxes more efficiently.

According to Mbadi, mitumba traders themselves pushed for the changes during consultations with the Treasury.

“During our meeting, they told me that KRA was harassing them over numerous tax compliance requirements. They suggested a unified tax regime applicable only at the point of entry, which then becomes a single final tax. That is what my team incorporated for consideration by the National Assembly,” he said.

“So, we agreed that VAT be simplified to make it easy for them to pay the taxes and also easy for KRA to collect them.”

He says traders complained about frequent compliance demands and pressure from tax authorities, leading to the proposal for a single tax collected only at the point of entry.

Why consumers are worried

Despite the government’s assurances, concerns are growing that the new tax could increase the cost of second-hand clothes and shoes across the country.

Mitumba remains the preferred clothing option for millions of low and middle-income Kenyans because of its affordability compared to new garments.

Industry players warn that importers are likely to transfer the additional costs to wholesalers, retailers and ultimately consumers.

Some traders estimate that a five per cent increase in import costs could trigger a 15 to 20 per cent rise in retail prices.

This means commonly purchased items such as jackets, dresses, trousers and shoes may become significantly more expensive in open-air markets and retail stalls.

Small-scale traders also fear reduced demand if prices rise sharply, potentially affecting jobs and incomes in the informal sector.

Higher excise duty on mobile phones

The Finance Bill 2026 also proposes a major increase in excise duty on mobile phones and communication devices.

Smartphones and related devices would attract a 25 per cent excise tax under the proposed law.

In another significant shift, the tax would be charged at the point of activation when a phone is first connected to a mobile network rather than during importation or at the point of sale.

The government says this approach is designed to improve tax enforcement and ensure all devices used in Kenya are captured within the tax system.

However, the move could raise the final cost of smartphones at a time when mobile connectivity is increasingly essential for banking, education, online work and communication.

Kenya has one of the highest mobile phone penetration rates in Africa, with smartphones playing a critical role in mobile money transactions, e-commerce and access to government services.

An increase in handset prices could therefore affect digital access, particularly among low-income users and young people purchasing entry-level smartphones.

The Finance Bill also signals a broader policy shift in how taxes are collected from importers.

Previously, the government considered introducing a small withholding tax treated as an advance payment that traders would later reconcile through tax filings.

The new proposal instead creates a final presumptive tax system, eliminating the need for additional filings or reconciliation.

The Treasury say this is intended to address persistent cases where traders import large volumes of goods but declare minimal or no taxable income.

While the government maintains that the changes will simplify taxation and improve compliance, businesses and consumers are closely watching Parliament’s debate on the proposals due to their potential impact on the cost of living.

If approved, the new taxes are expected to reshape Kenya’s mitumba and mobile phone markets from July 2026.