Treasury's quest for expanded KRA enforcement role hits legislative wall

The National Treasury has for years attempted to significantly increase the powers at the taxman’s disposal in its bid to grow tax revenues and every year, these attempts have faced the same concerns from Kenyans and MPs. 

Over the last four years, Treasury has, through the Finance Bill, proposed amendments to the different tax laws, particularly the Tax Procedures Act, seeking more power for the Kenya Revenue Authority (KRA). Every year, the outcome has been the same, with Kenyans and MPs rejecting the proposals.

This year was no different, with Treasury again seeking more power for KRA, including access to taxpayers’ financial data and freezing a taxpayer’s bank accounts or issuing agency notices while an appeal is active. 

MPs last week rejected the proposals to give KRA powers that included access to data from third parties, including banks and clients, as well as aggressive debt recovery capabilities during tax appeals, arguing that giving the taxman these powers would be unconstitutional. 

In what could, however, be an incremental win for KRA in a bid for more powers, but also give the tax agency additional resources, MPs yielded to giving KRA powers in determining taxpayers’ liabilities, albeit requiring the approval from the taxpayer. 

The MPs also recommended an increase in KRA’s agency fee for the Affordable Housing Levy to two per cent from 0.5 per cent in a bid to increase resources to mobilise tax collection.

Among the contentious issues in the Finance Bill 2026, the Treasury’s bid to enhance KRA’s enforcement power by deleting Section 42(14)(e) of the Tax Procedures Act, which shields taxpayers from an overzealous KRA protected taxpayers during active appeals. The Bill also proposed a new clause requiring taxpayers to pay the full 100 per cent of the principal tax amount in dispute before appealing.

The Act, in its current state, stops KRA from recovering disputed taxes while a case is pending in court. Aggrieved taxpayers also have the right to appeal an assessment by KRA and only after losing at the Tax Appeals Tribunal or the courts are they required to pay.

The Finance Bill 2026 had sought to remove this restriction, giving KRA powers to issue agency notices, freeze bank accounts and seize funds from a taxpayer's suppliers or banks before the court could rule on the validity of the tax assessment. 

The proposal was expected to help the taxman move around past legal losses in which attempts to get mandatory cash deposits, allowing the taxman to aggressively collect the disputed revenue upfront, have been fought on grounds that this would leave taxpayers with crippled cash flows while their legal challenges dragged on in court. Opponents also argued that the KRA takes a lengthy time to refund such monies to the detriment of companies, especially small and mid-sized.

The clause generated heated debate in Parliament as MPs resisted the proposal. 

The rejection resulted in the Leader of the Majority Party, Kimani Ichung’wah, proposing another amendment, proposing that any taxpayer seeking to appeal an assessment by KRA must first pay 50 per cent of the principal tax under dispute.

He had argued that this was a middle ground that would prevent taxpayers from using delay tactics in court while ensuring some immediate revenue flowed into government coffers.

When the proposal was put to a vote, MPs overwhelmingly voted against it. The MPs opposing it, drawn from both the ruling broad-based coalition and opposition, had earlier during debate argued that it is highly punitive and an intentional roadblock to justice for struggling businesses. 

Ichung’wah, who argued that the proposal was aimed at netting tax evaders, eventually conceded but momentarily, saying that the matter would be revisited as it needed a review of other laws, not just the Tax Procedures Act.

“As much as we want to look at tax evaders, we also need to look at other laws, including laws that would make it compulsory for the judicial process to be concluded within a certain period,” he said.

“We have agreed with the leader of the minority that we should give this matter more time for further consultation and see how we can align it with other laws because the amendment as proposed will not cater for the concerns, for instance, raised on the quick resolution of cases in courts. I will withdraw the amendment pending further consultations.”

It is not the first time that the Treasury has tried to review the law to give KRA a leeway to collect taxes even when the amount is disputed. In 2022, the Finance Bill had also proposed that taxpayers who felt unfairly assessed by KRA should deposit 50 per cent of the disputed tax amount to secure an appeal.

It also happened in 2024, when the Finance Bill revisited the upfront deposit before taxpayers could lodge a tax assessment appeal, then proposing a deposit of 20 per cent of the disputed tax amount before being granted the right to appeal to the Tax Appeals Tribunal.

It came up again in 2025 when the Finance Bill that year proposed to amend the Tax Procedures Act to allow the KRA to issue agency notices and attach taxpayer bank accounts despite a taxpayer having secured an active appeal.

Junet Mohamed, the leader of the minority party, who had resisted the proposal to have taxpayers deposit money so that they can be heard by TAT, appeared to agree with Ichnugwah’s plan to also review other laws and not look at the Tax Procedures Act in isolation. 

“It is true that there are people who are evading taxes and using the judicial system to make sure that they do not pay taxes. We are going to address the matter holistically and soon, we will bring legislation that every taxpayer commits to and pays taxes,” he said. Junet had earlier during the debate opposed the proposal, noting that it is “against the Constitution of this country” and that it is “something that is going to kill businesses”. 

Other than the proposal requiring aggrieved taxpayers to pay disputed taxes before being heard at the Tax Appeals Tribunal, the Treasury has tried to increase KRA’s powers when dealing with taxpayers in recent years through proposals in the Finance Bills. 

Last year, the Finance Bill 2025 had proposed giving KRA powers to access trade secrets and personal data. The proposal, however, was rejected by the Committee on Finance and National Planning, at the time noting that granting KRA sweeping access to personal data for tax compliance purposes, particularly where trade secrets or personal customer data are involved, did not meet the threshold of Article 31 of the Constitution, which guarantees the right to privacy.

Treasury had again made a similar attempt in the now infamous Finance Bill 2024 that was rejected in its entirety following the anti-government protests by Gen Z. Then, the Finance Bill had proposed a review of the Data Protection Act to exempt KRA from the requirements of the Act when auditing taxpayers.

At the time, stakeholders raised concerns that this was against the Data Protection Act and the Finance Bill 2024 was trying to take away the constitutional right to privacy through the back door. The Bill was eventually dropped when President Ruto declined to assent to it and instead withdrew the Bill. 

 This year, Treasury appears to have secured a victory in getting MPs to yield to giving KRA the power to use both KRA and third-party data, such as eTims data, withholding tax certificates and bank statements to calculate taxpayers’ tax obligations. 

This builds on a system that KRA has recently started using to auto-generate and fill in taxpayer income tax returns. The bill had proposed to make this binding but Parliament amended the bill to give taxpayers the right to amend and also approve these pre-populated returns. The MPs also require KRA to disclose the sources of the information used to pre-populate tax returns to the taxpayers.

In trying to give KRA the significant power to freeze assets and even snoop on private transactions, Treasury has been trying to enable the taxman to meet its revenue collection targets. This would, in turn, translate to the government borrowing less to meet budgetary obligations. 

KRA has over the years, failed to meet revenue collection targets set by Treasury, which has raised concerns in the past over the government’s tax collection ambitions but also the small pool of taxpayers that it relies on for revenue and the government living beyond its means. 

Over the current financial year, the latest Treasury shows that while KRA is supposed to collect Sh2.6 trillion by June 30, it had, as of May 29, collected Sh2.17 trillion, which means that to hit the target, it will have to collect more than Sh400 billion in the month of June alone. 

During its review of the Finance Bill 2026, the National Assembly’s Committee on Finance and Planning noted how constrained KRA has been, including a lack of resources to mobilise revenue. 

And in what appears to be another win for the tax agency, the Kuria Kimani-led Committee recommended increasing the agency fee that KRA earns from collecting the Affordable Housing Levy to two per cent from the current 0.5 per cent. 

“To enhance the capacity of the Authority to undertake revenue mobilisation initiatives, the Committee recommended measures to provide additional resources for effective tax administration. In this regard, the Committee proposed an amendment to the Affordable Housing Act to adjust the affordable housing levy contribution from the current rate of 0.5 per cent to a maximum rate of two per cent,” reads the report.

The housing levy, introduced through the Finance Act 2023, is set at 1.5 per cent of gross monthly salary for employees, which is then matched by an identical 1.5 per cent by the employer. It collects about Sh70 billion annually and has been projected to grow to Sh97 billion.

KRA, which also collects other levies on behalf of government entities, will also have its power enhanced to allow it to collect levies and other such charges. These include the review of the Tax Procedures Act to empower KRA to recover unpaid levies as a civil debt “in the same manner as unpaid tax under tax law”. In instances where the money owed is under Sh100,000, the Committee has proposed that “the debt may be recovered through a summary recovery process”. 

 “There is currently no uniform mechanism for enforcement and recovery of such amounts where they remain unpaid. This creates administrative challenges and may affect effective revenue mobilisation,” said the Committee. 

 “The Committee therefore recommended the amendment of the Tax Procedures Act to provide an enforcement mechanism for such collections, noting that the amendment would enhance efficiency in revenue collection, reduce administrative delays, and strengthen accountability in the management of public revenues.”