Nairobi, May 2, 2025 — The National Treasury has unveiled the Finance Bill 2025, a sweeping set of proposals that signal a major shift in Kenya’s tax and regulatory landscape. Tabled as part of the government’s effort to boost revenue collection and streamline fiscal operations, the bill has already triggered strong reactions across multiple sectors—raising questions about data privacy, consumer costs, and economic equity.
One of the most controversial clauses seeks to amend existing laws to allow the Kenya Revenue Authority (KRA) unfettered access to private financial data. If passed, this change would empower KRA to obtain personal banking and M-Pesa transaction details from businesses without the need for a court order, dismantling current legal protections designed to safeguard customer confidentiality. This proposal has alarmed data rights advocates who argue it could open the door to unchecked surveillance and abuse.
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Another significant proposal involves a steep increase in the fringe benefit tax, which the Treasury wants raised from the current 9 percent to 30 percent—aligning it with the corporate tax rate. Analysts warn that this move could discourage employers from offering non-cash benefits such as staff loans, company vehicles, or housing support, ultimately reducing employee welfare in a struggling economy.
In a blow to local manufacturing and digital inclusion, the bill also recommends the removal of the VAT exemption on locally assembled mobile phones. This could drive up handset prices and hamper the government’s own push to promote digital access through affordable devices. At the same time, a proposed 16 percent VAT on internet-based services—including streaming TV and radio, digital music, e-learning platforms, and software updates—threatens to make digital content more expensive for consumers, especially the youth and remote learners who rely heavily on online resources.
On the other end of the income spectrum, the Treasury has proposed increasing the tax-free daily travel allowance from Sh2,000 to Sh10,000—but only for high-income earners. Critics argue this change would disproportionately benefit senior government officials and corporate executives, while ordinary workers continue to grapple with stagnant incomes and rising costs.
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The bill offers some relief to the construction industry by proposing a reduction in the Export and Investment Promotion Levy from 17.5 percent to 5 percent on selected construction inputs, including semi-finished iron and steel. This is expected to lower operational costs and potentially boost infrastructure development.
However, the proposal to scrap zero-rated VAT status on critical items such as life-saving drugs, animal feed, electric buses, and solar batteries could offset these gains. Economists warn that removing these exemptions will likely increase the cost of essential goods and services, undermining the government’s commitment to affordable healthcare, food security, and clean energy.
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Further, the bill proposes extending the KRA’s timelines for processing tax refunds—from 90 to 120 days—and audit durations from 120 to 180 days. While this may improve tax administration, it risks compounding cash flow challenges for businesses and individuals awaiting refunds.
In a move that could offer some reprieve, the bill includes a clause allowing the Treasury Cabinet Secretary to waive penalties and interest arising from errors or delays caused by the electronic tax system. This provision is seen as a practical response to mounting frustrations over system glitches that have plagued taxpayers in recent years.
The Finance Bill 2025 is now headed to Parliament, where it will undergo scrutiny and public participation before it can be enacted. As stakeholders gear up for intense debate, the outcome will not only shape Kenya’s fiscal direction but also test the government’s ability to balance revenue needs with public trust, equity, and economic resilience.
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