Why stability of tax policy should matter for the taxman too

The public discourse in the run-up to the passing of the Finance Bill, 2026 raised a familiar concern about unpredictable tax changes. Kenyan businesses face a recurring nightmare: implementing new tax rules before they fully understand them.

Even before the ink on the Finance Act, 2026 had barely dried, uncertainty was already rippling through the business landscape.

A recent example appeared in media reports of furniture makers warning of price hikes and job cuts after the introduction of a 30 percent excise duty on imported inputs such as MDF, particle board, blockboard and plywood, a measure that was not contained in the Bill.

Businesses are right to worry. But there is an often-overlooked victim of tax instability, the Kenya Revenue Authority (KRA).

Kenya’s National Tax Policy notes that frequent changes in tax laws cause unpredictability and inefficiency in tax administration and impose additional costs on taxpayers and the revenue administration. The Public Finance Management Act, 2012 also calls for a reasonable degree of predictability in tax rates and the tax base. Stability, then, is not merely an investor issue, but a practical requirement for effective collection and administration.

Unpredictability harms the tax authority through increased disputes and litigation. In October 2024, it was reported that Sh313.5 billion in tax revenue was tied up in the courts and tribunal.

When new rules arrive suddenly or are introduced within a short window to enactment, they often reflect multiple competing views that have not been fully reconciled. The result can be poorly drafted provisions and unclear transition rules, which taxpayers then challenge more frequently and aggressively.

Tax officers subsequently spend significant time preparing objections and defending assessments. Litigation will always have a place in tax administration, but when ambiguity becomes common, disputes stop being exceptional and resources that should go to service, education, and targeted enforcement are absorbed by case management.