President William Ruto’s administration has opted against high taxes in the 2025 Finance Bill.
Treasury has projected a 91% drop in revenue collections from the Finance Bill 2025. This translates to a reduction of KSh314 billion. The move follows Treasury Cabinet Secretary John Mbadi’s decision to avoid steep tax increases.
If the Finance Bill 2025 is passed, the new measures are anticipated to generate KSh30 billion in revenue, in contrast to the harsh new revenue measures in 2024, when deadly protests erupted against the government’s proposals.
Mbadi said the decision was influenced by the fear of anti-government protests. He added that last year’s events forced the government to rethink its approach.
“We all learned from the events of the previous year. We had to look at ways of doing things differently,”
The CS stated, The government is targeting KSh3.3 trillion in revenue for the upcoming fiscal year, which will include taxes, fees such as passport charges, and proceeds from the sale of shares in state-owned companies like Safaricom and Kenya Pipeline Company.
Ruto administration still plans to borrow KSh916.5 billion. Out of this, KSh632.4 billion will come from the domestic banks, insurance companies, and pension plans.
The Treasury now aims to raise KSh30 billion through new tax measures. These include changes in VAT and income tax laws.
Some goods will shift from zero-rated to tax-exempt. This means manufacturers can no longer claim VAT on them.
The bill also proposes changes in PAYE. Employers must apply all deductions and exemptions before calculating tax.
KRA will play a key role in boosting collections. Officers will use internet-enabled cameras at excisable goods factories. They will also fully roll out digital electronic tax registers.
KRA plans to connect its systems with banks and mobile money platforms like M-Pesa. This will help monitor taxpayer activities more closely.
Meanwhile, increasing revenue remains a challenge. Past efforts to widen the tax base and remove tax breaks have not worked as expected.
Mbadi stated that the Treasury is still under pressure to raise funds. But the focus will now be on smarter enforcement rather than aggressive hikes.
