The Draft Finance Bill 2025, introduced by Treasury Cabinet Secretary John Mbadi, marks a significant shift in Kenya’s economic strategy, aiming for unprecedented growth by focusing on internal reforms rather than burdening citizens with new taxes. This bill comes at a time when the country has grappled with fluctuating imports of essential food commodities like maize, wheat, and beans, which are highly dependent on seasonal rainfall. The bill’s goal is to create stability while fostering economic growth and reducing the financial strain on citizens.
Key proposals in the bill include streamlining tax refund processes, amending crucial tax laws such as the Income Tax Act and the VAT Act, and enhancing tax administration efficiency. A notable feature is the support for small businesses, which will be allowed to fully deduct the cost of tools and equipment purchased in the year of acquisition. The bill also focuses on improving public-private tax thresholds, promoting fairness across sectors, and enhancing accountability in public spending.
One of the most significant aspects of the 2025 Finance Bill is the government’s commitment to austerity measures. CS Mbadi emphasized that the government’s priority is to reduce the budget deficit, which will drop from 4.9% to 4.3% of GDP, marking the first step in strengthening Kenya’s fiscal discipline. This includes reducing non-essential expenditure, rationalizing public spending, and implementing an e-procurement system to ensure value for money.
Additionally, the bill proposes a reduction in tax on digital asset transactions from 3% to 1.5%, a move designed to encourage the use of regulated platforms and combat the risks associated with the informal market. The bill is framed within President William Ruto’s economic vision, which seeks to improve the well-being of Kenyans through sustainable economic growth.
The 2025 Finance Bill represents a historic shift, with increased public participation and a focus on fairness, efficiency, and long-term economic stability.
