Kenya Cabinet Greenlights 2025 Finance Bill Aimed At Tax Reform And Fiscal Discipline

By Lisbeth Micheni, Kenya 

The Kenyan Cabinet has given the green light to the Finance Bill 2025, advancing a key element in the government’s push for economic realignment and stricter fiscal management.

The decision, made during a session chaired by President William Ruto at State House, Nairobi, reflects the administration’s determination to narrow the budget deficit and implement tax reforms without significantly increasing tax burdens.

The bill, which now moves to Parliament for debate, seeks to trim the fiscal deficit to 4.5% of the Gross Domestic Product for the 2025/26 financial year, improving from 5.1% recorded previously.

This approach aligns with the government’s broader Bottom-Up Economic Transformation Agenda (BETA), which emphasizes inclusive economic growth.

Instead of introducing sweeping new taxes, the Finance Bill targets inefficiencies and exploits long-standing gaps in tax laws, especially concerning tax refunds and exemptions.

Amendments to key tax legislation covering income, Value Added Tax, excise duty, and administrative procedures are expected to simplify compliance and close costly loopholes.

Among the proposed changes is a provision that permits small enterprises to write off the full cost of tools and equipment in the year of purchase, enhancing cash flow for micro and small businesses.

Additionally, retirees stand to benefit from a tax waiver on all gratuity payments, regardless of the pension source public or private.

To further ease the burden on workers, employers will now be obligated to automatically apply all applicable PAYE reliefs, sparing employees the hassle of filing for refunds with the Kenya Revenue Authority.

The Cabinet also endorsed other legislative and policy measures, including amendments to public finance laws to improve county emergency funding, improved retirement benefits for judges, and investment in healthcare infrastructure in Bungoma and Kericho.

It also signaled plans to establish a diplomatic mission in Haiti as part of Kenya’s growing role on the international stage.

This development comes months after the government withdrew the controversial Finance Bill 2024 following intense public protests that climaxed in the dramatic occupation of Parliament in June last year.

With the new bill, the administration hopes to strike a balance between reform, fairness, and sustainability in public finance.