The Finance Bill 2026 wants to put a 25 per cent excise duty on your phone. Treasury CS John Mbadi says that will actually make phones cheaper. Phone retailers say the opposite. Analysts have published numbers that contradict each other. And 48.7 million smartphone users in Kenya are trying to work out whether the device in their pocket is about to become a luxury item.

Here is what the Bill actually says, what Mbadi claims, what the critics argue, and what the maths looks like when you run it yourself.

What the Bill proposes

The Finance Bill 2026 amends the Excise Duty Act to introduce a 25 per cent excise duty on "telephones for cellular networks or for other wireless networks." That language covers smartphones, feature phones, and wireless-enabled devices.

This is a new line item. Until now, mobile phones have not attracted a standalone excise duty in Kenya. They have been subject to a different set of charges: 16 per cent VAT, Import Declaration Fee (IDF) at 3.5 per cent, Railway Development Levy (RDL) at 2 per cent, and customs duty at 25 per cent for phones imported from outside the East African Community (or zero for those assembled within it).

The Bill proposes adding the 25 per cent excise duty on top of, or in replacement of, some of those charges. Which interpretation is correct is the core of the disagreement.

Mbadi's argument: prices will fall

On 11th May 2026, CS Mbadi held a briefing at Treasury Buildings to address the growing backlash. His position was clear and specific.

"Phone prices will not go up because we have removed all the other taxes and replaced them with one single tax," he said.

According to Mbadi, the previous combination of VAT, IDF, RDL, and customs duty pushed the cumulative tax burden on imported phones to approximately 55 per cent of the phone's value. The new 25 per cent excise duty, he said, replaces all of those charges. The effective tax rate drops from 55 per cent to 25 per cent.

He added an important detail about timing. Under the proposal, the excise duty would not be payable at the point of importation. It would be charged when the phone is activated on a mobile network. This means a trader stocking phones in a shop would not pay the tax immediately. The levy only kicks in once the device reaches the end user and connects to a network.

"A trader stocking phones in a shop will not pay the tax immediately. The tax will only apply once the phone is sold and activated for use," Mbadi said.

If this is how the tax works in practice, Mbadi's argument has mathematical logic. Replacing a 55 per cent cumulative burden with a single 25 per cent charge at a later point in the supply chain would, on paper, reduce the total tax incidence on each device.

The critics' argument: prices will rise

The problem is that not everyone reads the Bill the same way Mbadi does.

Tax analysts and industry players have raised several objections.

First, the Bill does not explicitly state that the 25 per cent excise duty replaces all other charges. The existing VAT of 16 per cent is not removed by the Finance Bill 2026. Neither is the Import Declaration Fee nor the Railway Development Levy. If those charges remain and the excise duty is added on top, the total burden goes up, not down.

Second, the activation-based collection model is new and untested. The Bill does not specify who is responsible for collecting the excise duty at the point of activation. Is it the telecom operator? The importer? The retailer? Tax experts have warned that this ambiguity could create compliance chaos, with different players in the supply chain unsure of their obligations.

Third, even if the excise duty is lower than the combined existing charges, the way taxes compound through the supply chain matters. Each levy is calculated at a different stage on a different base. A 25 per cent excise duty applied to the retail value of a phone at activation could produce a higher absolute shilling amount than a 25 per cent customs duty applied to the CIF (cost, insurance, and freight) value at the port.

The maths: three phones Kenyans actually buy

Rather than trusting either side's talking points, let us run the numbers on three phones that represent different segments of the Kenyan market.

Phone 1: Entry-level Tecno Pop 9 (current retail price approximately KES 10,000)

If the 25 per cent excise duty is additive (on top of existing taxes), the price could rise to approximately KES 12,500 before dealer margins. If it is a replacement (as Mbadi claims), the price could theoretically fall slightly, though how much depends on whether all other levies are genuinely removed.

Phone 2: Mid-range Samsung Galaxy A16 (current retail approximately KES 25,000)

An additive 25 per cent pushes this to roughly KES 31,250. Under Mbadi's replacement model, it stays flat or drops marginally.

Phone 3: iPhone 16 (current retail approximately KES 150,000)

An additive model takes this past KES 187,000. The replacement model keeps it steady.

The gap between these two scenarios, additive versus replacement, is not a minor technicality. For the entry-level buyer spending KES 10,000, it is the difference between affording a smartphone and not.

Why this matters beyond price tags

Kenya had 48.7 million smartphones in use by December 2025, according to the Communications Authority. That is against 29.6 million feature phones. The country's digital economy, from M-Pesa transactions to eCitizen government services to online tax filing on iTax, runs on smartphones.

The average smartphone selling price in Kenya has already climbed sharply in recent years, from roughly KES 5,955 in 2019 to approximately KES 19,000 by mid-2025. That increase was driven by currency depreciation and rising import costs, not tax policy. Adding a new excise duty on top of that trend could push affordable smartphones out of reach for the households that need them most.

Programmes like Safaricom's Lipa Pole Pole, M-KOPA, and Watu Simu have spent years expanding smartphone access through buy-now-pay-later financing. Retailers have warned that a price increase driven by excise duty would undermine those efforts and push consumers toward the grey market for unregistered devices.

"Most of our customers already struggle to afford new smartphones, so any additional tax will push more people toward second-hand phones or devices brought in through unofficial channels," one central Kenya phone retailer told TechCabal.

There is also a self-defeating logic to consider. The government wants all taxpayers on eTIMS, all citizens on eCitizen, all businesses filing returns digitally. Those platforms require smartphones. Taxing the device that enables digital compliance makes the compliance itself harder to achieve.

What the Bill does not say

The Bill does not contain a clause explicitly removing VAT, IDF, or RDL on mobile phones. If Mbadi's claim that these charges are being replaced is accurate, the mechanism for that replacement is not visible in the published text. It may come through a separate statutory instrument or budget statement, but as of the date of publication, the Finance Bill 2026 as gazetted only adds the excise duty. It does not remove anything.

This is the gap that needs closing before the Bill passes. If the intention is consolidation, the consolidation needs to be written into law, not explained at press conferences.

What happens next

The Finance Bill 2026 is before the National Assembly. Public participation is open until 25th May 2026. If the phone tax matters to you, whether you are a consumer, a retailer, a telecom operator, or a buy-now-pay-later provider, this is the window to submit your views to the Departmental Committee on Finance and National Planning.

The question Parliament needs to answer is not whether 25 per cent sounds lower than 55 per cent. The question is whether the Bill, as written, actually delivers that reduction, or whether it adds a new charge on top of everything that already exists.

Until the text of the law matches the Treasury's talking points, the uncertainty will remain. And uncertainty, in a market of 48.7 million smartphone users, is not a small thing.

This article is based on the Finance Bill 2026 as published in the Kenya Gazette Supplement No. 113 on 5th May 2026, public statements by Treasury CS John Mbadi on 11th May 2026, and data from the Communications Authority of Kenya (December 2025).