On 11th May 2026, Treasury Cabinet Secretary John Mbadi addressed the growing public backlash against the proposed mitumba tax in the Finance Bill 2026. His defence was unusual for a CS. Instead of citing revenue targets or policy papers, he told a story about a meeting.

Mbadi said that a delegation of traders from Gikomba Market came to see him at the National Treasury. They expressed frustration with the current tax arrangement for mitumba imports. When you bring mitumba into the country, he explained, there are taxes at the point of entry, and then more taxes follow, including income tax. The traders told him that navigating this system was expensive and complicated. They wanted something simpler.

According to Mbadi, the traders asked for a system where they pay tax once, at the border, and nobody comes after them for more. The proposed Section 12H of the Income Tax Act, he said, was the Treasury's answer to that request.

Mbadi's maths

The CS also attempted to address what he called a public misunderstanding of how the tax would actually work. He walked through the calculation.

Under the proposal, the standard 16 per cent VAT applies on imported mitumba at the point of entry, as it does today. The Bill then adds a deemed profit component: KRA assumes the trader's profit margin is five per cent of the customs value. Income tax at 30 per cent is then applied to that assumed profit.

The effective income tax charge, Mbadi argued, works out to just 1.5 per cent of the customs value. Not five per cent. Not 30 per cent. One point five.

He went further, claiming that if traders were to comply fully with the current system, filing returns, calculating actual profit, and paying income tax on that profit, they would end up paying more than what the deemed profit model proposes.

What he left out

Mbadi's argument is not without merit. The current system does impose multiple tax obligations across different points in the supply chain, and most mitumba traders are not complying with those obligations. A single, predictable payment at the border has genuine administrative appeal.

But the framing matters.

First, the proposal was developed by the National Treasury, not by the traders. Traders may have expressed frustration with the existing system, but the specific mechanism, a deemed profit model with a five per cent assumption and a 30 per cent tax rate, is a policy instrument designed by government officials. The distinction between "traders asked for simpler taxes" and "traders asked for this particular tax" is significant.

Second, the 1.5 per cent effective rate sounds small, but it is new money. Most mitumba traders are not currently paying any income tax on this trade. Moving from zero to 1.5 per cent, multiplied across thousands of importers and millions of bales, is a revenue measure. Calling it a simplification does not change the fact that it raises the cost of importing goods that millions of Kenyans depend on for affordable clothing.

Third, the tax is payable before the goods are released. The trader must come up with the money upfront, before a single item has been sold. For a sector that operates on thin margins and relies on fast turnover, this is a cash flow issue that the "it is only 1.5 per cent" argument does not capture.

Fourth, the comparison to full compliance is somewhat academic. Mbadi is comparing the proposed tax to a scenario where every mitumba trader fully complies with income tax obligations. That scenario does not exist today. The real comparison is between what traders currently pay (close to zero in income tax) and what they would pay under the new system (1.5 per cent of customs value on every import, every time, no exceptions).

The political calculation

Mbadi also made a point of distancing the Finance Bill 2026 from the Finance Bill 2024, which triggered nationwide protests, deaths, and the eventual withdrawal of the entire Bill. He has repeatedly said the government "learned from" that experience and that the 2026 Bill does not introduce new tax rates.

That framing is technically accurate. The mitumba tax is not a new rate. It is a new tax type, applied using an existing rate to a newly created base. Whether voters and traders see the difference between "new rate" and "new tax" is a political question the Treasury will have to answer during public participation.

The Bill is currently before the National Assembly, with public submissions open until 25th May 2026.