President William Ruto chaired the Cabinet meeting at State House, where officials made a decisive move to tighten public finances and improve budgeting. The bill now heads to Parliament and proposes lowering the fiscal deficit to 4.5% of GDP for 2025/26, down from 5.1% in the previous year.
Unlike earlier bills that introduced new taxes, this one focuses on efficiency. It closes revenue loopholes, streamlines tax collection, and strengthens administration without burdening taxpayers.
One major reform simplifies tax refunds, addressing abuses from inflated claims. The bill also amends key laws—the Income Tax Act, VAT Act, Excise Duty Act, and Tax Procedures Act—to accelerate revenue collection and resolve tax disputes.
Small businesses will benefit from a provision allowing full deduction of tools and equipment in the year of purchase. This change improves liquidity and supports faster reinvestment.
Retirees will also see gains. The bill exempts all gratuity payments—whether from public or private pension schemes—from taxation, ensuring retirees receive their full benefits.
Another key measure requires employers to apply eligible tax reliefs when calculating Pay As You Earn (PAYE) taxes. Previously, many failed to do so, forcing employees to seek refunds from the Kenya Revenue Authority (KRA). The new approach simplifies compliance and reduces delays.
With Cabinet approval secured, the bill now moves to Parliament for debate. It follows the withdrawal of the controversial Finance Bill 2024, which sparked protests. As lawmakers review the new proposals, the government aims to balance economic stability with public support.
