The government has unveiled sweeping tax changes targeting the Information and Communications Technology (ICT) sector, including the removal of the 16 per cent Value Added Tax (VAT) on mobile phones while simultaneously increasing excise duty on the devices from 10 per cent to 25 per cent.
The measures were announced by National Treasury Cabinet Secretary John Mbadi during the presentation of the 2026/27 Budget Statement in Parliament on Thursday, forming part of a broader effort to balance revenue collection with the government's industrialisation agenda under the Bottom-Up Economic Transformation Agenda (BETA).
While the removal of VAT initially appeared to offer relief to consumers struggling with rising living costs, industry stakeholders say the impact on retail prices remains uncertain due to the significant increase in excise duty.
Mobile phone importers, distributors, and retailers are now assessing how the two tax measures will interact and whether consumers will ultimately pay less, more, or roughly the same amount for handsets.
The government argues that the changes are intended to streamline taxation in the sector while supporting domestic manufacturing and assembly of digital devices.
In a major boost to local industry, the Treasury announced a zero per cent import duty on parts used in the local assembly of mobile phones, laptops, tablets, and related electronic devices.
Officials say the move is designed to encourage investment in local assembly plants, create jobs, reduce dependence on imported finished products, and position Kenya as a regional technology manufacturing hub.
The incentive is expected to benefit firms operating assembly lines within the country, potentially lowering production costs and making locally assembled devices more competitive against fully imported alternatives.
The government hopes the measure will attract additional investors into Kenya's growing electronics manufacturing sector while supporting broader digital transformation goals.
However, the budget also introduced new costs for parts of the digital infrastructure ecosystem.
Treasury proposed a 10 per cent import duty on fibre optic cables and software imports, a move that could increase operational costs for telecommunications companies, internet service providers, technology firms, and other businesses dependent on digital infrastructure.
Analysts warn that the additional duty on fibre optic cables may raise the cost of network expansion projects at a time when Kenya is pushing to improve broadband connectivity across underserved regions.
The taxation of software imports has also sparked debate among technology stakeholders, some of whom fear it could increase costs for businesses relying on foreign software solutions and cloud-based services.
The latest changes signal a significant shift in Kenya's ICT tax policy, reflecting a strategy that seeks to promote local manufacturing while generating additional government revenue from imported finished products and digital infrastructure components.
Industry experts are expected to closely monitor how the measures affect smartphone affordability, investment decisions, and the broader technology ecosystem in the coming months.
Consumer groups have already called for clarity on the likely impact of the tax adjustments, noting that the removal of VAT could be offset by the higher excise duty, leaving buyers with little immediate price relief.
The ICT sector remains one of Kenya's fastest-growing economic segments, contributing significantly to employment, innovation, financial inclusion, and digital services. As a result, any tax policy changes affecting devices, connectivity infrastructure, and software are likely to have far-reaching implications for businesses and consumers alike.
The Treasury maintains that the reforms are necessary to support domestic value addition, strengthen local industries, and align tax policy with the government's long-term economic transformation objectives under BETA.
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