The Cabinet has approved the Finance Bill, 2025, signaling a fresh attempt by President William Ruto’s administration to recalibrate Kenya’s fiscal framework while implementing critical tax reforms. The decision was reached during a Cabinet meeting held on Tuesday at State House, Nairobi, with the President chairing the session.
The Bill, which now moves to Parliament for debate, is part of a broader budget overhaul aimed at narrowing the fiscal deficit to 4.5% of GDP in the 2025/26 financial year, down from 5.1% in 2024/25. The government hopes to strike a balance between reducing reliance on borrowing and fostering economic resilience through structural reforms rather than new tax hikes.
A Cabinet dispatch outlined the Bill’s focus on plugging revenue leaks and enhancing efficiency, particularly by addressing tax expenditures and fraudulent refund claims that have historically drained public funds. Instead of introducing sweeping new taxes, the Bill proposes a revamp of the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act to streamline administration and close legal loopholes.
Among the standout provisions is a measure allowing small businesses to fully deduct the cost of tools and equipment in the year of purchase—a move expected to boost liquidity and support entrepreneurship. In a significant relief for retirees, the Bill also proposes tax exemptions on all gratuity payments, regardless of whether they originate from public or private pension schemes.
Additionally, the Bill mandates employers to automatically apply all PAYE reliefs, sparing workers the burden of seeking refunds from the Kenya Revenue Authority.
These reforms align with the Bottom-Up Economic Transformation Agenda (BETA), the administration’s flagship policy aimed at enhancing grassroots economic empowerment.
The Cabinet also approved related legislative and development measures, including amendments to public finance laws to establish County Emergency Funds, enhanced retirement benefits for judges, and new healthcare infrastructure projects in Bungoma and Kericho counties.
In foreign policy, Kenya is set to open a Consulate General in Port-au-Prince, Haiti, furthering its diplomatic role in stabilizing the crisis-hit Caribbean nation.
The Finance Bill, 2025, arrives at a politically sensitive time, just months after the Finance Bill, 2024, was withdrawn in response to widespread youth-led protests. All eyes now turn to Parliament as the country braces for another round of critical fiscal deliberations.
