The Finance Bill 2025 arrives at a moment when Kenya’s economy is balancing between resilience and vulnerability. Following the upheavals caused by the 2023 and 2024 protests, particularly by the vocal Gen Z movement, the government appears to have taken a cautious and consultative approach to fiscal policy.
Unlike its controversial predecessor the aborted Finance Bill 2024 this year’s version comes with a bold declaration: no new taxes. Instead, the government aims to spur economic recovery, restore public trust, and consolidate fiscal space. With a current national debt load consuming over 60% of tax revenues and Kenya’s credit rating holding at “B-” with a stable outlook, the need for a strategic and less punitive bill cannot be overstated.
President William Ruto and the Cabinet have emphasized that the Finance Bill 2025 is part of their broader Bottom-Up Economic Transformation Agenda (BETA). By prioritizing reforms over revenue collection, the government hopes to narrow the fiscal deficit to 4.5% of GDP in FY2025/26, down from 5.1% in FY2024/25.
The bill proposes several pro-business and pro-worker amendments. Small businesses will benefit from immediate tax deductions on essential equipment purchases, while private sector employees see per diem allowances rise to Sh10,000 without tax implications. Content creators get relief with the scrapping of the 1.5% Digital Service Tax, and pensioners are offered full tax exemptions on their benefits. The government also seeks to streamline the tax refund process and empower employers to process tax reliefs directly, eliminating bureaucratic hurdles for employees.
Counties are mandated to establish emergency funds, and the judiciary stands to benefit from a structured pension system, enhancing both preparedness and institutional independence. Additionally, the construction and healthcare sectors receive boosts through reduced levies and proposed hospital developments.
Yet, despite its progressive front, the bill presents notable concerns. VAT changes affecting zero-rated goods could lead to increased production costs, as businesses lose the ability to claim input VAT refunds. This could translate to higher consumer prices on essential items like medicine, animal feed, and phone assembly materials.
Of particular concern is the proposed repeal of Section 59A(1B) of the Tax Procedures Act, which may allow KRA intrusive access to business systems, raising data privacy alarms. Critics compare this move to the 2024 Bill’s controversial data access clause, fearing it compromises customer confidentiality and breaches Kenya’s Data Protection Act.
The transport sector faces heavy upfront taxes, and refund delays now extended from 90 to 120 days—further choke cash flows for already strained businesses. Most alarmingly, development spending remains under KSh 300 billion in a KSh 4.3 trillion budget, dwarfed by KSh 1.1 trillion in debt repayments and KSh 1.3 trillion in recurrent expenditure.
With the bill under parliamentary review, Kenyans must actively engage in public participation. It is essential that MPs take citizen input seriously, not just as a formality, but as a foundational aspect of legislative democracy. The Finance Bill 2025 is an opportunity to reshape Kenya’s economy not through heavy taxation, but through smart reform, accountability, and public trust.
