Relief for Chamas as Finance Act 2026 removes proposed VAT on digital payments

The proposal, which had raised concerns among chamas, welfare groups and crowdfunding platforms, was dropped after the National Assembly adopted amendments recommended by the Departmental Committee on Finance and National Planning. The Finance Bill 2026 was passed on June 18, 2026, with 122 MPs voting in favour and 40 against before it was assented to by the President.

The committee said its recommendations sought to strike a balance between revenue mobilisation, economic recovery and the protection of taxpayers. Chairperson and Molo MP Kuria Kimani said the review was informed by public participation involving more than 100,000 submissions, county hearings and consultations with stakeholders and government agencies.

During the public participation process, industry players cautioned that taxing person-to-person digital transfers would increase the cost of using formal financial channels and discourage digital payments.

Kenya Bankers Association (KBA) Chief Executive Officer Raimond Molenje warned that additional taxes on digital payment platforms could push consumers back to cash transactions and the informal economy, ultimately undermining government efforts to expand the tax base through formal financial systems.

"You tax digital payment platforms, you drive consumers to the mattress and to the informal economy. Government cannot be able to collect revenue in that type of system," Molenje said during the public participation process. "If they want the formal systems to help them mobilise taxes, then we need to reduce the cost on payments."

Safaricom also opposed the proposal, estimating that combining the proposed VAT with the existing 15 per cent excise duty would have raised the effective tax burden on digital transactions from 15 per cent to 33.4 per cent—an 18.4 percentage point increase in transaction costs for users.

The Kenya Bankers Association further warned that cumulative taxes and charges on digital financial transactions could rise from 15 per cent to 58.4 per cent, potentially slowing the growth of digital payments and affecting Kenya's progress in financial inclusion.

Kenya Private Sector Alliance (KEPSA) Chairperson Dr. Jas Bedi also cautioned against the proposal, saying excessive taxation on digital payments could reverse gains made in financial inclusion and push businesses back into informal cash-based systems.

The decision has been welcomed by operators of digital fundraising and group savings platforms, which facilitate contributions for medical bills, school fees, funerals and other emergencies.

OneKitty, a platform that enables chamas and welfare groups to collect and manage contributions digitally, said removing the proposed VAT would help keep digital fundraising affordable for users.

"When this proposal was tabled, our users were understandably worried," said Danche Ng'ang'a, founder of OneKitty. "Chamas are not just savings groups; they are social safety nets that help families navigate some of life's most difficult moments. Adding extra costs to digital contributions would have made it harder for communities to support one another when it matters most."

"We are encouraged by the decision to remove the proposed VAT. It keeps digital contributions affordable, strengthens financial inclusion, and ensures that more of every contribution goes toward helping the intended beneficiary rather than covering additional transaction costs."

OneKitty co-founder Shem Maina said the outcome recognised the important role chamas continue to play in supporting households during financial emergencies.

The chama is how ordinary Kenyans survive extraordinary moments. Any additional friction in that system carries a human cost that does not appear in a budget projection. We are glad that came through in the final Bill," Maina said.

OneKitty operates as a digital platform that enables chamas and welfare groups to pool contributions, set fundraising goals and disburse funds. It also integrates with WhatsApp and Telegram to automate contribution tracking and record-keeping for group administrators.

With the Finance Act 2026 now in force, the proposed VAT on person-to-person digital transfers will not be introduced, providing certainty for millions of Kenyans who use mobile money and digital platforms to support group savings, fundraising initiatives and community welfare programmes.