The Finance Bill 2026 is facing mounting criticism from civil society groups and public finance experts, who argue that the proposed tax measures could deepen the financial strain on low-income Kenyans while offering relief to wealthy investors and high-net-worth individuals.

As the government pushes to raise Ksh4.82 trillion in revenue for the 2026/27 financial year, lobby groups warn that some of the proposed exemptions and incentives in the bill risk shifting the tax burden further onto ordinary households through taxes such as VAT and PAYE.

The Kenya Human Rights Commission (KHRC) and the Institute of Public Finance (IPF) say several clauses in the bill could widen inequality rather than promote fair taxation.

According to IPF, Kenya currently has about 7,200 dollar millionaires and 16 centi-millionaires, yet the country still lacks a formal wealth tax framework targeting ultra-rich individuals.

The think tank has proposed the introduction of a wealth tax targeting individuals with net assets exceeding Ksh129 million, while centi-millionaires with assets above Ksh12.915 billion would also be subjected to taxation.

IPF estimates that a wealth tax could generate up to Ksh129.5 billion annually in additional revenue.

“We can tax those net assets that wealthy persons own and ensure that they are captured within the taxation framework in the country,” Daniel Murakaru of IPF said.

The proposals come amid growing concerns that ordinary Kenyans continue to shoulder the largest share of the country’s tax burden despite rising living costs and stagnant incomes.

IPF and KHRC have particularly opposed provisions seeking to exempt Real Estate Investment Trusts (REITs) from Capital Gains Tax (CGT), warning that the move could create tax loopholes for wealthy property owners.

The organisations argue that investors could restructure property ownership through REITs to avoid taxation, leading to reduced government revenue and greater reliance on consumption taxes that disproportionately affect low-income earners.

“We are suggesting that the exemption of aircraft parts from VAT to be reconsidered and to be revised. Secondly, we are also talking about the exemption of capital gains tax on real estate investment trusts to also be looked into,” Murakaru said.

IPF also raised concerns over proposals to exempt all aircraft parts imported by operators or maintenance firms from VAT, arguing that the incentives primarily favour large corporations and wealthy investors rather than struggling households.

KHRC’s Annete Nerima warned that exempting REITs from profit tax could open avenues for aggressive tax avoidance.

“They will transfer their property to the trust, and they get to sell it. Those investors will get their money without paying the interest that they are supposed to pay. If that happens, it means that Kenya will lose money,” she said.

Nerima further argued that weak political goodwill and loopholes within the taxation framework continue to undermine efforts to ensure the wealthy contribute fairly to national revenue collection.

“We also rely on parliament, which sometimes passes some of these clauses that are very punitive to the ordinary Kenyans, to advance their own interests,” she said.

Wealthy benefiting?

She added that limited understanding of taxation issues among lawmakers has, at times, allowed regressive tax provisions to pass, ultimately benefiting the wealthy at the expense of ordinary citizens.

In a joint submission to the National Assembly Finance and Planning Committee, IPF and the Kenya Women Parliamentary Association (KEWOPA) opposed the proposed blanket exemption on CGT for property transfers involving REITs.

“We respectfully oppose the proposed blanket exemption of Capital Gains Tax on transfers of property to Real Estate Investment Trusts,” the joint submission read.

The organisations warned that such exemptions could disproportionately benefit high-net-worth individuals seeking to restructure assets for tax planning purposes.

“The amendment may therefore undermine progressive taxation principles by reducing the ability of the tax system to effectively tax substantial gains arising from high-value property transactions,” it noted.

IPF has now urged lawmakers to reject the proposed CGT exemptions, insisting that the measures weaken progressive taxation and could increase pressure on low-income earners already struggling with the rising cost of living.

While the government says the Finance Bill 2026 is intended to broaden the tax base and improve revenue collection efficiency, critics insist that a fair balance must be struck to avoid placing additional financial pressure on already strained Kenyan households.