Finance Bill 2025: Mbadi Defends New Proposals as Public Participation Begins

Public discourse on the Finance Bill 2025 has officially kicked off, with Treasury Cabinet Secretary (CS) John Mbadi defending the new proposals as people-friendly and progressive.

Speaking at the Youth Parliament Kenya forum in Nairobi, Mbadi maintained that the proposed law does not introduce new taxes. Instead, he said the focus is on improving efficiency and sealing revenue leakages.

“Borrowing from what happened last year and our national tax policy, we noticed that Kenyans do not need higher taxes and we need a predictive tax regime… That is the bottom line,” said Mbadi.

The National Assembly has invited views from Kenyans and business owners on the Bill, as the government attempts to draw lessons from past mistakes and embrace a sustainable fiscal framework.

Key Policy Shifts in the Finance Bill 2025

According to CS Mbadi, this year’s Finance Bill takes a markedly different route compared to the 2024 version, which had attracted intense public backlash. The 2025 Bill aligns with Kenya’s Medium-Term Debt Strategy and aims to make the tax regime more predictable, stable, and inclusive.

Here are some highlights:

• Tax Expenditures Under Review:
  Mbadi emphasized the need to reassess tax exemptions and zero-rated items, calling them leak points that cost the country dearly. “Some exemptions don’t serve their intended purpose. We are simply allowing revenue loss,” he noted. As a corrective measure, many zero-rated goods will now be classified as tax-exempt to avoid revenue loss through tax refunds.
• Relief for Retirees:
  The Bill proposes a tax exemption for pension and gratuity payouts, meaning retirees will not be taxed upon receiving their benefits.
• Support for Digital Entrepreneurs:
  The Digital Service Tax will be halved from 3% to 1.5%, a move expected to ease the burden on online service providers and encourage growth and formalisation within the digital economy.
• Improving Tax Visibility:
  The Kenya Revenue Authority (KRA) is set for a digital upgrade to increase efficiency in tracking non-compliant taxpayers and closing existing loopholes.

Kenya’s Debt Question Remains

While defending the government’s borrowing plans, Mbadi acknowledged that debt will still play a role in financing the 2025/26 fiscal year.

“Any economy will borrow. Even the world’s biggest economies borrow. But we must borrow responsibly,” he asserted.

He revealed that Treasury will seek KSh 284 billion in external loans and KSh 592 billion in domestic borrowing to fill the budget gap. The funds will be directed toward critical sectors such as infrastructure, education, healthcare, and social protection.

Despite the borrowing plan, Mbadi projected Kenya’s economy will grow at 5.3% in 2026, supported by improved tax administration and an expanding GDP base.

Public participation forums on the Finance Bill 2025 will continue across the country in the coming weeks, as stakeholders submit memoranda and engage lawmakers on the proposed fiscal changes.

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Finance Bill 2025: Mbadi Defends New Proposals as Public Participation Begins