Cabinet
The Cabinet, chaired by President William Ruto, has approved the Finance Bill 2025.
In a dispatch from State House, the Cabinet said the new Finance Bill focuses primarily on closing loopholes and enhancing efficiency.
“The Cabinet also approved the Finance Bill, 2025, which focuses primarily on closing loopholes and enhancing efficiency, including addressing loopholes related to tax expenditures that have historically been exploited to siphon funds from public coffers, such as through inflated tax refund claims,” read the dispatch in part.
The Cabinet noted that the Finance Bill 2025 seeks to minimise tax-raising measures and instead aims to enhance tax administration efficiency through a new legislative framework.
“Key provisions include streamlining tax refund processes, sealing legal gaps that delay revenue collection, and reducing tax disputes by amending the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act,” said the Cabinet.
The bill also proposes critical changes to support small businesses, allowing them to fully deduct the cost of everyday tools and equipment in the year of purchase, thereby eliminating unnecessary delays in accessing tax relief.
In addition, retirees will benefit from the bill as all gratuity payments, whether in public or private pension schemes, will now be fully tax-exempt, ensuring dignity for Kenya’s senior citizens after retirement.
Employers will also be required to automatically apply all eligible tax reliefs and exemptions when calculating Pay As You Earn (PAYE) taxes for employees. Currently, many employers omit these reliefs, forcing employees to seek refunds from the Kenya Revenue Authority.
Further, the Cabinet said the proposed KSh4.3 trillion budget for the financial year 2025/2026 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,” the cabinet added.
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