The Kenya Revenue Authority (KRA) is seeking sweeping new enforcement powers under the Finance Bill 2026 that could allow the taxman to aggressively pursue disputed taxes and freeze taxpayer assets before appeals are fully determined, triggering alarm among businesses, investors, and tax experts.

The proposals, contained in amendments to the Tax Procedures Act and Tax Appeals Tribunal framework, mark one of the most aggressive expansions of the KRA’s powers in recent years as the government intensifies efforts to raise revenue amid mounting debt pressure and a widening fiscal deficit.

Business groups warn the changes could expose companies to arbitrary enforcement, retrospective tax claims, and lengthy disputes that disrupt operations and cash flow.

The key concern is a proposed expansion of KRA’s anti-avoidance powers.

“The Commissioner may invalidate or re-characterise a transaction where the main purpose of the arrangement was to obtain a tax benefit,” the bill reads in part.

“KRA to make compensating adjustments that are appropriate to ensure the counteraction of any tax advantage obtained.”

Tax experts at the international law firm Bowmans say the wording grants the authority broad discretion to reopen and reinterpret transactions long after they were concluded.

The bill also introduces a five-year look-back period for disputed transactions, significantly widening KRA’s ability to revisit past tax arrangements.

“The provision would significantly increase the risk of tax disputes and retrospective adjustments,” Bowmans warns.

Taxpayers’ data monitoring

The bill also seeks to strengthen KRA’s control over taxpayer data and assessments through electronic monitoring systems.

“The Commissioner may generate a pre-populated return using information available in the electronic tax system,” it proposes.

While the Treasury argues the changes are designed to improve efficiency and seal loopholes, tax consultants say the amendment effectively shifts the burden of proof to taxpayers.

If KRA generates a tax assessment using its electronic systems, businesses may be forced to challenge the figures while enforcement action continues.

The Bill also introduces harsh penalties for businesses that fail to comply with electronic tax systems.

Under the proposed law, failure to comply would attract a penalty. For individual taxpayers, the minimum penalty would be KSh 10,000.

“A penalty equivalent to the higher of twice the amount of tax due or one hundred thousand shillings,” the proposal stated.

Bowmans warns that small businesses with faulty electronic invoicing systems or compliance glitches could face devastating financial consequences even where no deliberate tax evasion occurred.

Although the Bill does not explicitly use the phrase freeze assets, tax lawyers say the proposed powers strengthen KRA’s ability to secure disputed taxes through agency notices, bank account restrictions, and enforcement actions before appeals are concluded.

This is because tax disputes in Kenya often require taxpayers to settle part of the assessed amount or face collection action while cases are still pending before the Tax Appeals Tribunal or courts.

The proposed amendments come as KRA faces mounting pressure to meet ambitious revenue collection targets set by the National Treasury.

Treasury Cabinet Secretary John Mbadi has defended the Finance Bill 2026, arguing that stronger enforcement measures are necessary to improve tax compliance and reduce dependence on borrowing.

But analysts warn that expanding enforcement powers without equivalent taxpayer safeguards could undermine investor confidence at a time when Kenya is struggling to attract private sector investment.

Manufacturers, multinational firms, and small enterprises are expected to be among the most affected if KRA intensifies aggressive recovery measures during unresolved disputes.

The Bill also tightens compliance timelines by reducing the deadline for filing income tax returns from six months to four months after the end of the year of income.

Nil returns would now be required within one month.

Combined with broader anti-avoidance rules and electronic monitoring powers, analysts say the changes point to a significantly tougher tax environment for Kenyan businesses.

For many firms already battling weak consumer demand, high energy costs, and rising taxes, the Finance Bill 2026 signals that disputes with KRA could soon become more expensive, more aggressive, and harder to.