Kenya, April 30 -- Kenya's Cabinet has approved the Finance Bill 2025. This new law aims to improve how the government collects taxes without adding new taxes. The main goals are to close ways people avoid paying taxes and to lower the country's fiscal deficit from 5.3% to 4.5% of its economy.
The bill will change the budget and focus on cutting spending to use the country's money better.
President William Ruto's Cabinet announced this bill after a meeting at State House, Nairobi, on April 29, 2025. This step shows a move towards careful spending, especially since the public is sensitive about tax increases.
The Finance Bill 2025 aims to fix issues in tax laws to make it easier for people to pay taxes, reduce arguments about tax matters, and handle any problems with tax refunds that have cost the government too much money.
According to the Cabinet, "The bill wants to avoid raising taxes by instead making it easier to manage tax collection with new laws."
Some important changes include allowing small businesses to fully deduct the cost of tools and equipment right when they buy them, which will help ease financial pressure on business owners.
Retirees will now be fully exempt from taxes on their pension payments, making them more financially secure.
Employers will also need to automatically apply any eligible tax relief when calculating the taxes workers pay, which means employees won't have to chase refunds from the Kenya Revenue Authority (KRA).
This bill is part of broader measures to keep the fiscal deficit at 4.5% for the 2025/26 financial year. This is a decrease from previous years, showing a long-term goal of reaching 2.7%.
The initial budget estimate was KSh 4.3 trillion, but it will be changed significantly before being presented to Parliament. This reflects the government's commitment to spending wisely.
The Cabinet stated, "This plan helps reduce public debt risks and allows for funding essential public services." They stressed the importance of collecting more revenue and ensuring people follow tax rules without adding new taxes.
Financial expert James Muthui praised the plan, saying, "Good tax collection is key for sound money management. Improving how taxes are collected reduces stress on citizens."
This approval comes almost a year after the Finance Bill 2024 was withdrawn due to protests led by young people in Kenya, which escalated and led to events at Parliament on June 25, 2024.
The proposed tax increases in the 2024 bill caused unrest, pushing President Ruto to choose careful spending to fulfill financial commitments.
Netizens show cautious hope about this new bill, with users appreciating its focus on fixing tax loopholes and helping small businesses.
The Finance Bill 2025 will now go to Parliament for discussion and public input, where it is expected to be carefully reviewed.
The Kenya Private Sector Alliance (KEPSA) has already urged lawmakers to include reforms that support businesses and make tax collection better, showing strong involvement from the private sector.
Published by HT Digital Content Services with permission from Bana Kenya.