Finance Bill 2026: The 'activation' query in the 25% mobile phone tax proposal

The Treasury Ministry has, however, clarified that the matter has been marred by misinformation, stating that the proposal does not introduce a new tax on mobile phones but instead relieves Kenyans from existing tax burdens.

According to Treasury Cabinet Secretary John Mbadi, Mobile phones are currently subject to five domestic taxes and levies during importation and along the supply chain: a 16% VAT, 10% excise duty, 25% import duty, 2.5% Import Declaration Fee, and a 2% Railway Development Levy.

He argues that the 25% will be a significant reduction from the current 55.5% tariff on phone imports.

"All that is 55.5%, and when you put your phones in the stores, your liquidity is constrained. Now we do not want to tax any phone until it is sold, then you pay one tax, an excise duty of 25%. That to me is the way to simplify tax," he said on Tuesday during a public address at Jevanjee Gardens in Nairobi.

The Bill seeks to amend Section 36 of the Excise Duty Act to dictate that the 25% shall be paid to the Kenya Revenue Authority (KRA) by the time of the activation of the phone.

Clause 34 of the Bill dictates that the liability of an importer or a licensed manufacturer on locally purchased or imported phones shall arise at the time of the phone's activation.

What is 'activation'?

Head of Research at Capital A Investment Bank, Churchill Ogutu, says that there remains a stark ambiguity on the definition of "activation", which might confuse buyers and retailers on the approach to tax payments.

"The end game here is like transferring the burden to the consumer at the point of activation. What accounts for the activation? Is it when you switch it on or when you buy it?" Ogutu posed during an interview with Citizen TV on Tuesday.

He added that the Common External Tariff (CET) shared within the East African Community (EAC) is another pending amendment to coincide with the Excise Duty adjustment.

East Africa uses a common customs duty for goods imported from outside the region, as member states use standardised import duties applied to all products entering the region, with phones set at 25%.

"The only thing that is missing here is the 25% Customs Duty. The Finance Bill touches on these taxes, but customs is an East African Community affair. At this point, we have not had visibility," Ogutu added.

Return of IMEI registration?

His sentiments were echoed by Davis Tayo, the Managing Director at Africa Social Financing Centre, who opined that the introduction might be a cashflow reprieve for importers since they will not pay any fees before selling, but questions remain on the method of payment.

He questioned whether KRA will receive the amount upon switching the purchased phone or upon sourcing it from the seller, adding that there is no metric to determine the specific amount payable based on a phone's retail price.

Tayo added that the move will potentially infringe on Kenyans’ right to privacy since the government can begin monitoring all mobile phones sold in the country to ensure tax compliance through International Mobile Equipment Identity (IMEI) numbers.

"The clarity the government must give is not just to the traders. Concerns are that this is a way of getting this IMEI number without asking for it, because how else do you identify a tax came from a specific gadget?" Tayo added

This comes after the Communication Authority of Kenya (CA), in October 2025, announced that the KRA will, from January 1, 2025, begin monitoring all locally assembled and imported mobile phones sold in the country to ensure tax compliance.

CA said that all phone manufacturers, importers and retailers, as well as mobile network operators, were required to upload IMEI numbers of all devices assembled or imported after November 1, 2024, into a KRA portal for tax compliance monitoring.

IMEI number is a 15-digit number unique to each device, which mobile network providers use to identify valid devices and is often used for security purposes in most countries, not tax compliance.

Law enforcement agencies, through these network operators, use them to track devices that may be stolen or compromised and block them from accessing the network. Most jurisdictions handle tax compliance at customs and clearance points.

The move raised eyebrows for the risks it posed, as the Data Protection Act, which governs data privacy, dictates that a data subject has a right to, among others, be informed of the use to which their personal data is to be put.

The High Court quashed the directive as the CA threatened to appeal the decision.