The Cabinet meeting that was chaired by President William Ruto on Tuesday, April 29, at State House Nairobi approved the Finance Bill of 2025, amid pressure to close tax loopholes and enhance government efficiency.
This means the Bill will now be tabled in Parliament as part of budget realignments targeting a sharper fiscal deficit of 4.5 per cent of GDP for the 2025/26 financial year, down from 5.1 per cent the year before.
“The Bill seeks to minimise tax-raising measures. Instead, it aims to enhance tax administration efficiency through a new legislative framework,” the Cabinet said in a statement.
The Finance Bill of 2024 was withdrawn by the Kenya Kwanza administration following demonstrations organized by young people that lead to the invasion of Parliament on June 25, 2024.
The Finance Bill, 2025, will streamline tax refund processes, reduce tax disputes, and amend key tax laws, including the Income Tax Act, VAT Act, Excise Duty Act, and Tax Procedures Act.
It also proposes critical changes to support tiny businesses by enabling them to fully deduct the cost of everyday tools and equipment in the year of purchase, thereby eliminating unnecessary delays in accessing tax relief.
The Cabinet said retirees will benefit significantly 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,” the Cabinet said.
Kenya is seeking to tighten its fiscal belt on the back of inefficiencies including loopholes related to tax expenditures that have historically been exploited to siphon funds from public coffers, such as through inflated tax refund claims.
The East African country hopes to streamline tax refund processes, seal legal gaps that delay revenue collection, while reducing tax disputes by amending the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act.
Retirement benefits
The Finance Bill of 2025 further dedicates pension and retirement benefits framework for judges of the superior courts was endorsed, aiming to ensure their financial security and protect judicial independence.
“Serving judges will be under a Defined Benefit system, while new appointees will be under a Defined Contribution system. The bill also provides enhanced retirement benefits, including medical coverage and diplomatic privileges,” the Cabinet added.
The Cabinet has also endorsed initiatives: including a Public Finance Management (Amendment) Bill mandating County Emergency Funds, the Judges Retirement Benefits Bill to enhance judicial independence, and major healthcare infrastructure projects in Bungoma and Kericho.
Construction of two Level VI teaching and referral hospitals in Bungoma and Kericho counties in partnership with the African Development Bank, for example, will help improve access to quality healthcare.
On the other hand, Capital Markets Act Amendments are expected to remove shareholder limits in regulated institutions to stimulate investment and deepen financial markets.
The government also signaled its intent to open a Consulate General in Port-au-Prince, Haiti, part of Kenya’s expanding diplomatic footprint and its lead role in restoring stability to the Caribbean nation.
Additionally, the Cabinet approved the Draft Pest Control Products Bill, 2024 which modernizes the regulation of pest control products, establishes the Pest Control Products Authority, and aims to enhance safety and standards in the sector.
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