No new taxes as Cabinet approves Finance Bill 2025

The Cabinet on Tuesday approved the Finance Bill 2025, which targets to remove loopholes in tax refunds, avoid new taxes, boost efficiency in revenue collection and cut disputes.

A dispatch sent to newsrooms from State House Nairobi said the Cabinet agreed to serious spending cuts was inevitable so that the budget deficit doesn’t go above 4.5 per cent of the GDP. In other words, the government wants to spend less and work smarter.

Workers in the private sector will now get a raise in their untaxed per diem—from Ksh 2,000 to Ksh 10,000. This comes after public servants already got the same increase. Treasury says this is about fairness and treating everyone equally.

The decision is, however, seen as a step to avoid fresh protests similar to those witnessed last June which led to the collapse of the Finance Bill 2024.

Also, from now on, employers must calculate all taxes, deductions, and reliefs when they pay salaries. This will make life easier for employees and improve how KRA collects taxes.

Digital content creators will also now breathe a sigh of relief after the 1.5 per cent Digital Service Tax will be removed. Instead, Kenya will follow international standards and make big tech companies without offices here pay their fair share.

The Finance Bill 2025 also focuses on stopping fraud in the tax system. Some companies have been claiming billions in tax refunds but not lowering prices for customers. Treasury calls this the “biggest quiet scandal” and wants to end it.

To fix this, KRA will use better technology to trace suspicious claims. Treasury will also lose some powers that were often abused to approve shady refunds. In fixing the legal system, the bill will also change how tax disputes are handled moving forward.

Gratuity payments in public and private pensions is now to be fully tax-exempt, a move meant to protect retirees’ income and enhance dignity.

The Cabinet also approved the Judges Retirement Benefits Bill, 2025, introducing a Defined Benefit scheme for serving judges and a Defined Contribution plan for future ones.

Cabinet also directed employers to apply PAYE tax reliefs automatically; saying move addresses delayed refunds caused by non-compliance and ensures accurate tax calculations. The sitting also approved Public Finance Management (PFM)- (Amendment) Bill 2024, requiring counties to set up emergency funds; move follows 2023 El Nino gaps and seeks better disaster preparedness.

Cabinet okayed the construction of two new referral hospitals in Bungoma and Kericho counties. AfDB (Africa Development Bank) is to support with funding construction, to boost access to quality healthcare under UHC (Universal Health Coverage).

Meanwhile, the Cabinet also approved the Pest Control Products Bill 2024; to align with international standards, ensuring food safety, environmental protection and public health.

Additionally, the Cabinet is backing Capital Markets Act changes; with shareholder limits in regulated firms scrapped, with Cabinet Secretary for National Treasury given power and latitude to reinstate them when needed.

Cabinet approved the establishment of a Consulate General in Port-au-Prince, Haiti; consulate to provide strategic support to Kenya’s peace restoration efforts.