Cabinet Approves Finance Bill 2025: What it Entails.
On Tuesday, April 29, President William Ruto’s Cabinet approved the Finance Bill 2025, a comprehensive piece of legislation designed to improve efficiency and close tax expenditure loopholes that have historically enabled fund misappropriation, particularly through exaggerated tax refund claims.
A central aim of the bill is to reduce reliance on new tax measures by instituting a fresh legislative framework. This move has alleviated concerns that the government might introduce additional taxes this year. The Cabinet indicated that the reforms are integral to the Bottom-Up Economic Transformation Agenda (BETA), underscoring the administration’s drive for a more resilient and inclusive economy.
To enhance revenue collection and reduce legal disputes, the bill proposes key amendments to existing tax laws, including the Income Tax Act, Value Added Tax (VAT) Act, Excise Duty Act, and the Tax Procedures Act. These changes are expected to streamline the tax refund process and eliminate gaps that hinder efficient tax administration.
One Cabinet official noted that the goal is to ensure taxes are managed in a way that supports both compliance and transparency, reducing unnecessary burdens on businesses and citizens. Another added that the new structure was designed not to introduce more taxes but to enhance the collection of existing ones.
Support for Small Businesses and Retirees
Finance Bill 2025 introduces critical provisions benefiting small businesses by allowing them to fully deduct the cost of daily operational tools and equipment in the year they are purchased. This immediate deduction aims to boost cash flow and incentivise investment in business assets.
Retirees also stand to gain significantly. Under the proposed law, all gratuity payments—whether from public or private pension schemes—will be entirely exempt from taxation. A Cabinet member stated that this measure reflects the government’s commitment to honouring long-serving citizens and easing their financial burden in retirement.
Emergency Preparedness Strengthened Through New Bill
In addition to the Finance Bill, the Cabinet also endorsed the Public Finance Management (Amendment) Bill, 2024, which seeks to enhance emergency readiness at the county level. If passed by Parliament, it will allow counties to create County Emergency Funds, improving their capacity to handle crises effectively.
This initiative is a direct response to the shortcomings exposed during the 2023 El Niño rains. The Cabinet noted that the amendment followed broad consultations and was mandated during the 24th Ordinary Session of the Intergovernmental Budget and Economic Council (IBEC) held in August 2024. The intention is to safeguard lives, livelihoods, and vital infrastructure against future emergencies.
Read Also: Education Crisis Looms as Counties and Budget Controller Lock Horns Over Bursary Release.
Historical Context and Public Response
The Cabinet’s current decision comes nearly a year after widespread public demonstrations against the 2024 Finance Bill, which had proposed numerous tax increases. This context influenced the drafting of the 2025 Bill, which places greater emphasis on legislative efficiency, economic inclusiveness, and avoiding direct tax hikes.
Cabinet Approves Finance Bill 2025: What it Entails
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