2025 finance bill is a game changer: great gains for Kenyans in different walks of life

BY ISAAC MWAURA- Government Spokesman

The much awaited finance bill 2025 if finally out. The social media has been awash with fake proposals in order to incite Kenyans against the government.

In fact, the timing of the recent documentary on BBC is suspect, noting very well that they deliberately carried a one sided story in order to advance a certain narrative.

The concoction of lies obviously by the merchants of chaos and the incitement is a well-choreographed strategy to not only be smirches the image of the government, but to also to destabilize the country.

However, President William Ruto has ensured that this year’s finance bill has gains for Kenyans. To be gin with, employers must apply reliefs automatically such as SHA, Housing Levy, and mortgage deductions, before computing the Pay as You Earn, meaning less taxation for employees.

This was not the case before, leading to employees waiting for tax refunds from the Kenya Revenue Authority. This proposal will lead to efficient tax administration and predictable income for all employees, leading to effective planning on a personal and organizational level.

It also helps the KRA to reduce the backlog of tax refunds, Secondly, the bill pro poses a raft of measures to do away with fraudulent tax refund claims, by sealing loopholes that have been used by a few companies to deny Kenyans revenue.

The proposals will help to improve efficiency, thus saving the country billions of shillings that can now be used for development such as roads, hospitals, schools, water, etc.

It’s refreshing and empowering to note that our senior citizens who are retiring won’t pay tax on their pension (both lump sum and monthly payments) thus getting a higher pay to live a more comfortable life after serving the country.

This will also help increase self-reliance on their part. The tax free pension will now apply to private insurance schemes as they were not covered before.

In addition, small businesses can fully deduct the cost of tools and equipment in the same year, e.g, utensils, at a go, thus reducing the whole business of having tedious tax accounting regimes.

Moreover, the bill proposes changes that will make re funds faster, in order to re duce tax disputes. This will thus ensure more money availability for businesses and for the government to improve public service delivery.

In order reduce unnecessary expenditure that leads to borrowing, thus increasing public debt; the fiscal deficit will be reduced to 4.5% of GDP in FY2025/26.

This also aligns with international best practice. As Joseph Stiglitz said “A country’s tax policy is ultimately a statement about its values.” The finance bill has also proposed measures that will ensure that unnecessary expenditure in the government such us office consumables and travel have been reduced in order to focus on more important priorities.

Content creators especially the GenZs can rest easy since there is relief for them as the digital service tax has been done away with. It means more income for them and their families.

This will encourage digital innovation and it also aligns with global norms. Also, employees in the private sector usually pay tax on their daily per diem, which the Salaries and Remuneration Commission (SRC) had capped at only Ksh 2,000.

This has been raised to Ksh 10,000 and its now tax free thus boosting morale and ensuring fair ness in the formal sector. Further, the crypto tax rate has been halved from 3% to 1.5%, thus enabling more Kenyans to earn more hence have greater dispos able income.

This will also help to positions Kenya as a fintech-friendly destination for investors. In order reduce multiple and unclear means of tax ation for online businesses that don’t operate from the confines of our borders, the Significant Economic Presence (SEP) model has been adopted for digital multinationals.

This ide ally shifts tax liability to global platforms with local revenue. This is in line with the global principle of the International Mone tary Fund that Digital taxes must evolve with the plat form economy, not punish its users. 

As Hernado De Soto in his book, The Mystery of Capital observes, “simplification is the best reform. Complexity breeds corruption.” Moreover, the maxim amongst the OECD countries is that the tax system should not lag behind the economy it aims to govern.

It’s interesting to note that some companies have been making money through refund claims of up to Ksh 47 Billion in the manufacturing and sale of bread.

The new revenue raising measures proposes the closure of revenue leakages in order to protect tax payer’s money as a means of disincentivizing the tax cheats and refund cartels.

In addition, stiff penalties for fraudulent refund claims have been proposed, KRA will be enabled to use of AI and data analytics in fraud detection. It will also be modernized in order to increase its investigative capacity.

Most importantly, the discretionary powers of the National Treasury to give tax waivers have now been limited in the pro posed piece of legislation in order to prevent abuse.

This will help to reduce the scope for corruption and patronage. It is true to say that every shilling lost to fraud is a shilling stolen from public trust, and that technology is the greatest equalizer in the fight against corruption.

Indeed, illicit refunds are worse than evasion since they are theft disguised as compliance. According to research conducted by Transparency International, “where laws exist without timelines, impunity flourishes.”

The new finance bill proposes time-bound processes for refunds and taxation processes in order to speed up resolution and to reduces backlog.

There are also new enforcement penalties for non-filers and defaulters. T his will not only help to improve tax compliance culture but also lead to higher collection of revenue, thus deterring the government from increasing public debt through borrowing.

For example, some people upon being forced to pay taxes end up appealing at the KRA tax appeals tribunal. Since a simple lodging of an appeal is equal to a stay of execution of the previous judgment, over Ksh 170 Billion hasn’t been collected so far.

This money would have been more useful in bringing development to Kenyans such as roads, SHA etc, yet some people are using the court system to evade their obligations.

The new bill proposes that unless one has an express stay order from a court of law, they are compelled to pay the amounts due to the taxman.

Appeals must henceforth be accompanied by payment of tax due in order to discourage frivolous litigation since justice delayed is revenue denied.

Legal bottlenecks cost the state more than unpaid taxes. Kenya has lost its competitive advantage in aircraft repairs to our neighbors due to high taxes.

The bill proposes the exemption of aircraft repair spare parts, in order to boosts Kenya’s ambition to be an African aviation hub. This alone will help create over 3,000 jobs for our aviation technician and engineers.

In order to support digital money, fintech start ups will have a much more simplified compliance for onboarding purposes. This is important because Kenya is the number destination for startup capital in Africa for the last 2 years in a row.

This will promote local tech enterprise growth since incentives work best when tied to performance. In fact, nations rise on the strength of their builders, not their buyers.

The Finance bill 2025, is thus a game changer in that, rather than introducing new taxes, it seeks to make those who aren’t meeting their obligation to do so as a patriotic duty.

The bill is dealing with corruption & wastage, ensuring fairness and equity, and providing incentives towards creating more jobs for our youth in different sectors of the economy. Let’s support it for a better prosperous Kenya.