The Cabinet has approved the Finance Bill, 2025, in a move it says is aimed at tightening Kenya’s fiscal belt while sparking reforms across the taxation landscape.

The Cabinet meeting, chaired by President William Ruto at State House, Nairobi, on Tuesday, marks a critical step in the government’s strategy to reduce the fiscal deficit and live, quite literally, within its means.

The Bill, which now heads to Parliament, is part of sweeping budget realignments targeting a sharper fiscal deficit of 4.5% of GDP for the 2025/26 financial year, down from 5.1% the year prior.

A Cabinet despatch sent to newsrooms said the Bill “focuses primarily on closing loopholes and enhancing efficiency, including addressing loopholes related to tax expenditures that have historically been exploited to siphon funds from public coffers, such as through inflated tax refund claims.”

Which means, rather than impose a myriad more tax burdens, the Bill takes a scalpel to the system, streamlining refund processes, closing legal loopholes, and simplifying tax administration through amendments to the Income Tax Act, VAT Act, Excise Duty Act, and the Tax Procedures Act.

One standout provision offers a lifeline to Kenya’s small businesses: allowing full deduction of tools and equipment costs in the year of purchase, a timely relief in a climate where liquidity is king.

Also, in a long-overdue nod to retirees, the Bill exempts all gratuity payments from tax, whether from public or private pensions; a move bound to warm the hearts of Kenya’s senior citizens.

Meanwhile, employers will now be required to apply all PAYE reliefs automatically, saving workers the bureaucratic dance with the Kenya Revenue Authority (KRA) for refunds.

These measures, according to the Cabinet, are pillars of the Bottom-Up Economic Transformation Agenda (BETA), the administration’s flagship socio-economic blueprint.

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Beyond the Finance Bill, the Cabinet also endorsed a raft of other initiatives: including a Public Finance Management (Amendment) Bill mandating County Emergency Funds, the Judges Retirement Benefits Bill to enhance judicial independence, and major healthcare infrastructure projects in Bungoma and Kericho.

The government also signaled its intent to open a Consulate General in Port-au-Prince, Haiti, part of Kenya’s expanding diplomatic footprint and its lead role in restoring stability to the Caribbean nation.

As the Finance Bill, 2025, heads to Parliament, the stage is now set for a consequential debate after the President Ruto administration withdrew Finance Bill, 2024 following a wave of youth-led protests that culminated in the invasion of Parliament on June 25, 2024.