Finance Bill 2026 sparks outcry as creatives warn of higher taxes on royalties and digital income

The creative economy has become one of the country's fastest-growing sectors, driven by musicians filling arenas across Africa, filmmakers landing international streaming deals and digital creators building businesses from their smartphones.

But as Parliament debates the Finance Bill 2026, many in the industry fear the proposed changes could make it more expensive to create, distribute and monetise content.

At the heart of the debate is an amendment that expands the definition of royalties under the Income Tax Act, potentially bringing more creative-sector earnings under tax obligations.

While the government seeks to modernise tax laws and capture revenue from the digital economy, the proposals risk burdening a sector already struggling with funding and monetisation challenges.

Singer and songwriter Dan Aceda says the biggest concern is the absence of incentives for creatives.

"The first big problem with the way the Finance Bill is written is that it doesn't contain any tax incentives for the creative industries. None. Zero," he says.

"This is unfortunate because it communicates that the administration is looking at the creative industry purely as a taxpayer rather than a strategic economic sector."

His sentiments echo a growing concern among creatives who feel Kenya is expanding taxation without introducing policies that encourage investment in music, film and digital content.

One of the most significant proposals in the Bill is the expansion of the definition of royalties.

Traditionally, royalties are payments creators receive when their intellectual property is used, whether through music streams, film licensing, publishing rights or broadcasting agreements.

The Finance Bill broadens this definition to include additional intellectual property and digital-content-related arrangements.

According to Aceda, the move continues a trend that has been unfolding since 2023.

"The definition of royalty has been expanded every year since 2023. That means more tax payments for newer categories of payments such as software licences and stock photo subscriptions," he says.

Because these costs are often incurred during the creative process, he argues, Kenyan creators could become less competitive than their international counterparts.

Veteran music executive producer and talent manager Edward Wilton believes the proposals risk slowing the growth of an industry that is still developing sustainable revenue streams.

"The biggest challenge facing Kenyan creatives is not a lack of talent but a lack of structures that allow them to earn consistently from their work," says Wilton.

"Royalties are supposed to be the reward for creativity and intellectual property. If creators feel that every new revenue stream is being subjected to additional taxes without corresponding incentives, then innovation and investment in the sector will inevitably slow down."

Wilton argues that Kenya should focus on growing the sector rather than simply expanding the tax base.

Impact on musicians, filmmakers and influencers

Boniface Mwalii the lead at Hove Consultancy says the proposed changes significantly widen the scope of what qualifies as royalty income.

"The Finance Bill 2026 substantially rewrites the definition of 'royalty' in the Income Tax Act to explicitly include payments for the use of any copyright in a literary, artistic or scientific work, as well as films and tapes for radio or television broadcasting," he explains.

"This definition widens the tax net for anyone licensing creative intellectual property."

The implications could affect musicians earning from streaming platforms, filmmakers licensing content to broadcasters, photographers selling images online and influencers monetising content through international platforms.

Mwalii notes that the proposals also touch on digital creators through a 20 per cent non-resident withholding tax applicable to certain digital transactions.

"Musicians, actors, comedians and other live performers will also have to part with a similar amount for their services," he says.

The concern comes at a time when thousands of young Kenyans are earning income through YouTube, TikTok, Instagram and podcasting platforms, making the creator economy a significant source of employment.

The smartphone tax debate

Beyond royalties, creatives are particularly alarmed by the proposed 25 per cent excise duty on imported mobile phones.

For many creators, smartphones are more than communication devices. They are cameras, editing suites, marketing platforms and distribution channels rolled into one.

"The excise duty on mobile phones is extremely high," says Aceda.

"Excise duty is meant to restrict access. For the creative industry, the administration is restricting the phone, which is a primary input in our work and also a primary way that our work is distributed and consumed."

The concern is amplified by Kenya's growing reliance on mobile technology. According to the Communications Authority of Kenya, the country recorded 78.3 million mobile phones by December 2025, with smartphones accounting for 48.7 million devices.

For the creative sector, these numbers represent both audiences and creators. Millions of Kenyans now use smartphones to produce videos, record music, edit content and earn income through digital platforms.

Industry players argue that making smartphones more expensive could slow the growth of the creator economy by limiting access to essential production tools and increasing the cost of content creation.

Compliance concerns

Another contentious proposal involves shortening tax filing timelines and expanding the audit powers of the Kenya Revenue Authority (KRA).

It is argued that freelancers and small creative businesses, many of which already struggle with tax compliance, could face additional administrative burdens.

"The shortening of the tax filing period and increasing audit powers of KRA is not progressive tax policy and leans towards over-surveillance and control," Aceda says.