Kenyan taxpayers will not face immediate enforcement action on disputed taxes after Members of Parliament rejected proposals that would have allowed the Kenya Revenue Authority to freeze bank accounts, issue agency notices, and recover funds while tax disputes are still under appeal.
The proposals, contained in the Finance Bill 2026, sought to strengthen the tax authority’s powers by enabling it to recover disputed taxes before determinations are made by the Tax Appeals Tribunal or the courts.
Lawmakers opposed the changes, arguing that granting such powers to the tax authority would undermine constitutional protections and expose businesses and individuals to financial strain before their cases are fully heard.
At the centre of the debate was a proposal to delete Section 42(14)(e) of the Tax Procedures Act, which currently restricts aggressive recovery measures while tax appeals are ongoing.
If passed, the amendment would have allowed the Kenya Revenue Authority to recover disputed taxes through agency notices and account freezes even before appeal outcomes.
Critics warned that the move could severely affect cash flow for businesses, particularly small and medium-sized enterprises, by forcing payment before legal processes are concluded.
The National Treasury had also proposed requiring taxpayers to pay the full principal tax amount in dispute before filing an appeal. However, MPs rejected the idea, arguing that access to justice should not depend on a taxpayer’s ability to make large upfront payments.
During the debate, Majority Leader Kimani Ichung’wah proposed a compromise amendment requiring taxpayers appealing KRA assessments to first pay 50 percent of the disputed principal tax.
He said the measure would reduce delays in tax disputes while ensuring the government still collects some revenue during the appeal process.
However, he later withdrew the proposal, citing the need for further consultations and alignment with other laws governing dispute resolution timelines.
Lawmakers ultimately voted against the proposals, maintaining the existing legal framework that prevents the Kenya Revenue Authority from recovering disputed taxes until appeals are concluded.
Despite this, Parliament approved limited amendments that enhance the tax authority’s ability to determine taxpayers’ liabilities, subject to procedural safeguards and taxpayer consent requirements.
MPs also endorsed an increase in the agency fee for collecting the Affordable Housing Levy from 0.5 percent to 2 percent, aimed at strengthening tax administration capacity.
The decision represents another setback for the National Treasury, which has repeatedly sought expanded enforcement powers for the Kenya Revenue Authority through successive finance bills, amid ongoing debate over balancing revenue collection efficiency with taxpayer rights and fair hearing protections.
– By Regan Oluoch
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