President William Ruto’s Cabinet has approved the Finance Bill 2025, paving the way for key economic reforms aimed at sealing tax loopholes and boosting efficiency in revenue collection.
The decision was made during a Cabinet meeting held on Tuesday, April 29.
The bill does not propose any new taxes, easing public concerns after last year’s controversial Finance Bill 2024 sparked nationwide protests.
Instead, it focuses on tightening systems to prevent misuse of tax exemptions and inflated refund claims.
Among the major proposals in the bill is a plan to simplify and speed up tax refunds, close legal loopholes that delay revenue collection, and reduce tax-related court cases.
Amendments will be made to the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act.
In a win for small businesses, the bill proposes allowing full tax deductions on the cost of tools and equipment in the year they are bought—helping ease the financial burden for startups and entrepreneurs.
Retirees are also expected to benefit from the reforms, as all gratuity payments—whether from public or private pensions—will now be completely exempt from tax.
The Cabinet noted that the bill supports the Bottom-Up Economic Transformation Agenda (BETA), aimed at promoting inclusive economic growth.
In the same meeting, the Cabinet also approved the Public Finance Management (Amendment) Bill, 2024. If passed by Parliament, the new law will enable county governments to create County Emergency Funds.
“This decision follows the serious gaps exposed by the 2023 El Niño rains and stems from extensive consultations and a directive issued at the 24th Ordinary Session of the Intergovernmental Budget and Economic Council (IBEC) in August 2024,” read part of the cabinet dispatch.
The Cabinet’s approval of the Finance Bill 2025 comes nearly a year after public backlash over the now-defunct Finance Bill 2024, which had proposed several unpopular tax hikes.
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