Finance Bill 2025: List of Taxes, Policies That'll Be Changed, Reviewed in New Proposals
- President William Ruto's Cabinet approved the Finance Bill 2025 for the financial year 2025/26
- The bill proposes changes in the revenue-raising measures and tax policies that will be used to finance the KSh 4.3 trillion budget
- However, the Cabinet revealed changes in key tax heads under the bill, which will see a substantial revision of the budget
- Among the taxes scheduled for amendments are the PAYE, in which the Cabinet urged employers to consider reliefs and VAT
Wycliffe Musalia has over six years of experience in financial, business, technology, climate and health reporting, which offers deep insights into Kenyan and global economic trends. He currently works as a business editor at TUKO.co.ke.
Finance Bill 2025 will bring major changes to tax heads and revenue-raising measures.
Source: Twitter
On Tuesday, April 29, President William Ruto's Cabinet approved the revenue-raising proposal for the financial year 2025/26.
Kenya's fiscal deficit
A dispatch sent to media houses said that the Finance Bill 2025 stipulates changes in the budget, which will realign with the government's fiscal consolidation policy.
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The Cabinet affirmed Kenya Kwanza's commitment to living within its means, noting that budget adjustments for 2025/26 are aimed at capping the fiscal deficit at below 4.5% of GDP from the current 5.1%.
"We aim to cap fiscal deficit at no more than 4.5% for the year 2025/26, down from 5.3% reported in 2023/24 and 5.1% in 2024/25. Our medium-term target is to cut to 2.7% of GDP," read the despatch in part.
Which tax changes are proposed in Finance Bill 2025
The Finance Bill 2025 proposed changes in the revenue-raising measures and tax policies that will be used to finance the KSh 4.3 trillion budget.
However, the Cabinet revealed changes in key tax heads under the bill, which will see a substantial revision of the budget
"The initial budget estimates of KSh 4.3 trillion will undergo substantial revisions before being tabled in Parliament.
"These adjustments are part of broader austerity measures designed to strengthen fiscal discipline, reduce public debt vulnerabilities, and create the fiscal space necessary to deliver essential public goods and services," said the Cabinet
According to the dispatch, the bill seeks to minimise tax-raising measures and enhance administration efficiency.
Source: Twitter
Below are the tax policies and measures set to be reviewed:
1. Tax refund
The Bill proposes changes to streamline the tax refund process to bridge gaps in revenue collection.
Kenya's tax refunds amount to KSh 525 billion, with VAT refunds accounting for 65% or KSh 320 billion.
Treasury CS John Mbadi said that his team is working on a proposal from the rejected Finance Bill 2024 to reduce such expenditures, which he termed fictitious.
2. Income Tax
The government seeks to amend the Income Tax Act and avoid disputes resulting from raiding employees' pay slips.
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Finance Bill 2025: Kenyan govt orders employers to apply all tax reliefs in PAYE deductions
In February 2025, CS Mbadi said that the government will no longer impose more taxes on Kenyans, especially on employment income.
3. VAT
The bill also seeks to amend the Value Added Tax (VAT) Act and reduce heavy taxation.
Mbadi added that VAT is among the tax heads that will not experience any additions in the Finance Bill 2025.
4. Excise Duty
In the first quarter of 2024/25, the Kenya Revenue Authority (KRA) collected KSh 68.13 billion in excise duty.
The Finance Bill proposes changes to this tax head in the financial year 2025/26.
5. Tax Procedures Act
The Finance Bill 2025 proposed changes to the Tax Procedures Act.
In December 2024, President William Ruto signed the Tax Procedures (Amendments), among other tax changes.
Which other tax changes are proposed
The Cabinet also proposed changes that will benefit retired workers through tax exemptions on gratuity payments.
The Bill also seeks to direct employers to consider tax reliefs and exemptions in the computation of PAYE.
The Cabinet said the current measure, which allows employers to omit the tax reliefs, increases the rate at which employers seek refunds from KRA.
Proofreading by Jackson Otukho, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
