Business groups and tax experts have raised the alarm, warning that the changes could lead to arbitrary enforcement and retrospective tax claims that would disrupt business operations. The main problem is the expansion of powers to combat tax evasion, which will allow the Commissioner for Human Rights to invalidate or reclassify transactions that are believed to have been structured primarily for the purpose of obtaining tax benefits. Legal experts from Bowmans warn that such broad discretion could allow KRA to reopen and rethink past deals, as the bill provides for a five-year review period.
In addition, the bill aims to strengthen KRA's control over taxpayers' data by allowing the commissioner to compile pre-filled tax returns using electronic monitoring systems. The consultants argue that this effectively shifts the burden of proof to taxpayers, who may be forced to challenge the estimates prepared by KRA while law enforcement actions continue. The bill also provides for serious penalties for non-compliance with the requirements for electronic tax systems, fines can reach double the amount of tax or 100,000 KSh, whichever is greater. Bowmans warns that even minor technical failures can lead to devastating financial consequences for small businesses.
Although the bill does not explicitly use the term «asset freeze», legal experts note that the proposed powers strengthen KRA's ability to seek payment of disputed taxes through agency notifications and restrictions on bank accounts pending the completion of court appeals. Finance Minister John Mbadi defended the measures, saying they were necessary to improve compliance and reduce reliance on borrowing.
However, analysts warn that these aggressive measures, combined with stricter deadlines for filing documents, such as reducing the deadline for filing a tax return from six to four months, could undermine investor confidence. As manufacturers and small businesses face high energy costs and weak demand, the Finance Bill of 2026 suggests that tax disputes in Kenya will become more frequent, expensive and difficult to resolve.
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