Kenyans can breathe a sigh of relief after the Cabinet approved the Finance Bill 2025 without introducing new taxes.
The decision marks a significant shift in tone from last year, when the Finance Bill 2024, which included several tax review proposals, was withdrawn following widespread youth-led protests that culminated in the invasion of parliament on June 25.
In a Cabinet meeting held on April 29 and chaired by President William Ruto, cabinet secretaries were directed to work closely with the National Treasury to implement extensive budget realignments.
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This forms part of a broader strategy to cap the fiscal deficit at 4.5% of GDP in the 2025/26 financial year, down from 5.3% in 2023/24 and 5.1% in 2024/25, with a medium-term target of 2.7%.
Ruto announced that the initial Sh 4.3 trillion budget will be significantly revised before being presented to parliament. The Cabinet emphasized that the new approach prioritizes living within means, reducing public debt, and creating room to fund essential public services.
Unlike previous finance bills that often focused on revenue-raising through new levies, the 2025 version zeroes in on efficiency. The bill aims to seal loopholes, enhance tax collection, and reduce disputes by amending the Income Tax Act, VAT Act, Excise Duty Act, and Tax Procedures Act.
Among key reforms, the bill allows small businesses to deduct the full cost of tools and equipment in the year of purchase, improving access to tax relief. Retirees are also set to benefit, with all gratuity payments from both public and private pension schemes becoming fully tax-exempt.
Employers will now be required to automatically apply all eligible tax reliefs when calculating PAYE, sparing workers from the hassle of seeking refunds from the Kenya Revenue Authority.
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The Cabinet also approved several other policy initiatives:
Public Finance Management (Amendment) Bill, 2024: County governments will now be legally required to establish County Emergency Funds, a lesson drawn from the chaos of the 2023 El Niño floods.
Judges Retirement Benefits Bill, 2025: Judges of superior courts will now benefit from a dedicated pension scheme, offering enhanced retirement benefits and reinforcing judicial independence.
Healthcare expansion: The government gave a green light to the construction of Level VI teaching and referral hospitals in Bungoma and Kericho, in partnership with the African Development Bank, to boost healthcare in underserved areas.
Capital markets reforms: Amendments to the Capital Markets Act will eliminate shareholder limits in regulated entities, aimed at stimulating investment and deepening financial markets.
Pest Control Products Bill, 2024: A new regulatory framework will be introduced to modernize pest control in Kenya, enhancing food safety and agricultural exports.
Diplomatic expansion: Kenya will open a consulate general in Port-au-Prince, Haiti, to support its peacekeeping mission and broaden diplomatic ties in the Caribbean.
The dispatch from the Cabinet comes two weeks after Bizna Kenya reported the government was considering using social media as one of the ways to collect public views during public participation for the Finance Bill 2025.
Chair of the National Assembly Finance Committee, Kimani Kuria, had alluded that there may be more taxes in the new bill to help plug the revenue deficit.
