NAIROBI, Kenya, May 11 – Treasury Cabinet Secretary John Mbadi has defended the government’s proposed tax changes targeting global card payment firms, saying the measures are aimed at widening Kenya’s tax base without increasing costs for consumers.
The proposal in the Finance Bill 2026 seeks to amend the Income Tax Act to classify interchange fees and merchant service fees from card transactions as management or professional fees subject to withholding tax.
The move would require payments made by banks and financial institutions to international card companies such as Visa and Mastercard to attract withholding tax.
Mbadi dismissed concerns that the tax would be transferred to consumers through higher transaction charges, saying the target is firms earning income from Kenya’s financial sector.
The proposal follows a legal dispute between the Kenya Revenue Authority and commercial banks over whether interchange fees qualify for withholding tax.
In a previous ruling involving Absa Bank Kenya, the Supreme Court held that interchange fees did not amount to management or professional fees under the existing law.
Mbadi also confirmed that several controversial proposals had been dropped from the final Finance Bill 2026, including planned taxes on bottled water, mobile phones, financial services and second-hand clothes, popularly known as mitumba.
