Parliament Rejects Treasury's Plan to Raise Mobile Phone Excise Duty to 25 Percent

Lawmakers quashed the National Treasury's wheeze to hike excise duty on mobile phones from 10 percent to 25 percent, switching the tax collection point from import to when you first turn a phone on. This was in the face of some pretty sharp concerns about affordability, tax admin efficiency and digital inclusion.

Parliamentary Opposition Turns Up The Heat

The National Assembly's finance committee fought hard to have this contentious proposal yanked from the Finance Bill 2026. They reckoned it would cause all sorts of problems for compliance, slow down tax collections and leave consumers guessing

Treasury had suggested slapping a 25 percent duty on mobile phones and at the same time moving the tax payment point from when the phone arrives in the country or is released from the factory to the moment it's activated on a mobile network.

Administrative and Consumer Hurdles Ahead

MPs were worried that moving the tax point to activation would hold up tax collections and delay them from import to sales point. This would potentially leave consumers in the dark about whether a phone has been taxed or not

Analysts in the telecom sector reckoned there's a huge grey area around when a phone is activated and becomes subject to tax - this just adds to the complexity of getting this policy right.

"The committee came to the view that this proposal could lead to really poor tax administration and make mobile phones unaffordable for loads of people," said the finance committee in its report.

Broad Stakeholder Backlash

This Tax proposal had many interested parties up in arms, including phone retailers, the Kenya Private Sector Alliance, the Kenya Association of Manufactures, the Kenya National Chamber of Commerce and Industry and loads of law firms and consultancies.

Everybody agreed that higher duties would stifle local manufacturing investment, undermine digital inclusion and make communication and digital services way too expensive for low income people

Victory For Local Assembly

In a separate win for local phone makers, Parliament gave the thumbs down to a proposal to reclassify locally made mobile phones and batteries from zero-rated to VAT-exempt status.

The committee decided to stick with the zero-rated status given them under the Finance Act 2023 which had already made it cheaper for local manufacturers to make phones and supported local investment.

"These items were recently zero-rated to support local manufacturing and bring down prices of essential items. If we now go back on this it will drive up costs, discourage investment and make the tax system really hard to predict," said the report.

This means that local manufacturers like M-Kopa, Sun King and East African Device Assembly Kenya get to claim a VAT refund on the phones they make.

Treasury Has To Take Another Route

Treasury Secretary John Mbadi has now confirmed that Kenya will have to look at getting duty exemption for the inputs used to make phones locally while keeping a 25 percent customs duty on finished phones imported from elsewhere.

However, Kenya couldn't just go and abolish this duty on its own since they are part of the East African Community customs framework which needs regional approval

As a result taxes on imported mobile phones will now come down marginally to 50 percent from 54.5 percent a while back - still a lot higher than the initial 25 percent target and leaving customers with pretty high imported mobile phone costs