Manufacturers warn of job losses, company closures if Finance Bill 2026 is passed

KEPSA Chair Jas Bedi, KAM CEO Tobias Alando, Kenya Bankers Association CEO Raimond Molenje and other stakeholders after making their submissions on the Finance Bill, 2026 at Glee Hotel, Kiambu County, on May 25, 2026. [Elvis Ogina, Standard]

Manufacturers have opposed sweeping tax proposals in the Ruto administration’s Finance Bill 2026, warning that new levies on imports from East African Community (EAC) partner States could wipe out Kenya’s regional trade and cost tens of thousands of jobs as companies shut down over unsustainable higher costs. 

In a detailed memorandum to Parliament, the Kenya Association of Manufacturers (KAM), representing over 950 companies and more than 40 per cent of the country's manufacturing sector, said the Bill's tax changes would "wipe out" Kenya's competitive edge in the region and trigger a wave of disinvestment from the country. 

Kenya's exports to its EAC partners rose to Sh351.2 billion in 2025, accounting for 77.6 per cent of the country's total shipments to Africa, according to the 2026 Economic Survey by the Kenya National Bureau of Statistics. 

This trade is now at risk of being wiped out, the manufacturers say. 

"We are deeply concerned that the proposed excise duty on imports originating from the EAC goes against the EAC Treaty and Protocols, Heads of EAC Summit decisions and bilateral agreements," KAM Chief Executive Tobias Alando said in the submission yesterday.

 "This puts at risk 30 per cent of Kenyan exports, which go to EAC Partner States."

The manufacturing sector directly employs 388,564 Kenyans, accounting for 11.7 per cent of formal jobs, and contributes 7.1 per cent of GDP – down from 7.3 per cent in 2024, a decline the industry blames on unpredictable tax policies.

The memorandum cited frequent flip-flops on excise duties – noting that sugar confectionery taxes, for example, have been introduced and withdrawn in five separate Finance Bills since 2019 – as evidence of a policy environment that makes long-term investment planning impossible.

"We have seen excise duty on locally produced sugar confectionery introduced in 2019, 2020, 2021, 2023, and now 2026," Alando said. "Such frequent changes increase business uncertainty."

Among the most contentious proposals is a clause that would allow the Kenya Revenue Authority (KRA) to issue agency notices against taxpayers who have appealed to the Tax Appeals Tribunal or the courts. 

An agency notice is a directive from the KRA to a third party—such as a bank or customer—to seize or redirect funds owed to a taxpayer to settle the taxpayer’s disputed tax liability, even while an appeal is ongoing.

KAM warned this would "cripple a taxpayer's finances at the very moment they are exercising their legal right to challenge an assessment."

The Bill also seeks to legislatively reverse a Supreme Court decision on withholding tax for interchange and merchant service fees – a move manufacturers said "fundamentally undermines the integrity, certainty and predictability of Kenya's tax system."

Industry simulations shared with The Standard show Kenyan cement producers would see costs rise by approximately Sh16 per 50kg bag under a proposed five per cent excise duty on coal, a key input.

With affordable housing already under pressure, manufacturers warned the levy would "negatively affect the government's Affordable Housing Programme."

On glass processing, where Kenya has no domestic float glass production, total taxes on imported float glass now stand at 49.5 per cent compared to 2.5 per cent in Uganda and zero per cent in Rwanda. 

Ten glass processors have seen output fall more than 70 per cent, with about 2,000 workers facing redundancy.

Uganda has already amended its laws to define local raw materials as those originating from any EAC partner States, the memorandum noted, citing a letter from Ugandan authorities to Kenya's Treasury.

That move effectively leaves Kenyan manufacturers paying higher duties while regional competitors enjoy preferential treatment.

KAM is demanding that excise duty should not apply to EAC-origin imports, that a proposed 60 per cent deemed dividend distribution tax be scrapped, and that VAT refund mechanisms  be overhauled to allow the tax authority to retain a percentage of collections specifically for refund purposes.

The association also wants a reduction in the top PAYE rate from 35 per cent to 30 per cent, arguing that Kenya's marginal rate is five points higher than the corporate tax rate of 30 per cent – a structure it called "inequitable."

"Individuals are taxed on their gross earnings while corporations can claim deductions," the memorandum said. "The higher rates in Kenya apply at relatively low incomes – 30 per cent applies to earnings over Sh32,333 per month, compared to the equivalent of Sh255,000 in Ghana."

With manufacturing GDP contribution already declining, industry executives fear the Bill could accelerate de-industrialisation.

Kenya's exports of finished steel products fell 63 per cent in 2024 after the introduction of an export levy, KAM data shows, with mills now considering relocating to Uganda or Tanzania.

De-industrialisation refers to the sustained decline in a country's manufacturing capacity as a share of output and employment, often driven by rising costs, policy unpredictability, or competition from lower-tax jurisdictions.

"This is not about protecting profits – it is about whether Kenya remains a manufacturing destination," Alando said. "When our neighbours offer zero excise on raw materials, and we impose 25 per cent to 35 per cent, the investment case for Kenya collapses."

Parliament has scheduled public hearings for early June. Treasury officials have defended the proposed tax hikes under the Finance Bill.