The National Government Constituency Development Fund is facing its biggest financial crisis in years after the Kenya Revenue Authority issued demands totalling Ksh2.4 billion for alleged unpaid taxes stretching back to the 2020-2021 financial year. The tax types in dispute include Pay As You Earn on allowances paid to constituency project management committees, withholding tax on supplies, and Value Added Tax on certain works.
The matter exploded into the open on November 19, 2025, when the NG-CDF Board appeared before the National Assembly Select Committee on the fund chaired by Kassait Kamket. Members were shown copies of demand letters and agency notices that KRA had started serving on commercial banks holding constituency accounts.
Kassait Kamket told the Board in a tense exchange that captured the mood of the entire House: “You are telling us that KRA wants to attach CDF money for taxes? This money is for building classrooms, for bursaries, for water projects. If you allow this to happen, every project in every constituency will stop. We will not sit and watch.”
The NG-CDF Chief Executive Officer, Stephen Kemoi, confirmed that the arrears had accumulated over five financial years because of differing interpretations of tax law. “KRA maintains that allowances paid to PMC members are taxable as employment income, and that supplies to projects attract VAT and withholding tax. We have always held that the fund is a government-to-government transfer and the ultimate beneficiaries are members of the public,” he explained.
During the same session, Molo Member of Parliament Kuria Kimani, who also sits on the committee, issued a blunt warning: “If KRA touches even one shilling of CDF money, we will pass a resolution in this House to stop remitting any taxes to the Kenya Revenue Authority until this matter is resolved once and for all.”
The dispute has united lawmakers across the political divide. Kitui South MP Rachael Nyamai told journalists outside Parliament Buildings: “We are not fighting for ourselves. We are fighting for the child in a village who will miss school because her bursary is stuck, for the mother who will deliver in a muddy maternity because the wing is incomplete. KRA cannot tax development.”
On November 20, National Assembly Majority Leader Kimani Ichung’wah raised the issue on the floor of the House and demanded an urgent statement from the National Treasury. “How does a government agency tax money that Parliament has appropriated for development in constituencies? This money has already gone through the full taxation cycle at source. This is double taxation of the worst kind,” he said.
Treasury Cabinet Secretary John Mbadi has since confirmed that he has constituted a technical team comprising officials from Treasury, KRA, the NG-CDF Board and the Attorney-General to resolve the impasse within ninety days. Speaking in Mombasa on November 22, Mbadi said: “We are aware of the implications on the ground. The President has directed that no constituency should suffer because of a technical tax dispute. A lasting solution is being worked on.”
The NG-CDF Board has meanwhile written to all 290 constituency fund managers directing them to continue disbursing money for ongoing projects while the talks continue. In a circular dated November 21, the Board assured MPs that no account would be frozen during the mediation period.
Despite the temporary relief, anxiety remains high in constituencies. Several fund managers have reported receiving calls from contractors threatening to down tools if pending certificates are not honoured before the Christmas break.
The dispute has also revived long-standing calls for legislative clarity on the tax status of the fund. A proposal to amend the NG-CDF Act to explicitly exempt the fund from all taxes has been circulating among MPs and is expected to be tabled when the House resumes in February 2026.
For now, the Ksh2.4 billion cloud hangs over every classroom under construction, every borehole being drilled, and every bursary cheque waiting to be signed.
