Treasury Cabinet Secretary John Mbadi has revealed that there would be no increase in rates for Value Added Tax (VAT).
Speaking during a meeting with Bunge la Wananchi on Monday, February 3, Mbadi allayed fears over the potential increase of tax rates in the upcoming Finance Bill 2025.
Mbadi stated that the other adjustments will not be major adding that employed Kenyans were already feeling the pinch of the taxes that were introduced in Finance Bill 2023.
"Take it from me, we are not increasing VAT at all. Actually, the Finance Bill of this year may not have tax adjustments upwards in terms of rates," he asserted.
" We cannot overtax Kenyans anymore. We have reached a limit where we are saying no more space for taxation especially on employment income."
The Finance Bill 2025 is expected to be presented in Cabinet before April 18, 2025.
Later on, the CS will table the proposals to Parliament before public participation is done across the country.
Finance Bills contain tax proposals which are used to fund the budget. However, under the Kenya Kwanza administration, Kenyans have lamented the effects of the proposals on their income.
In particular, Finance Bill 2024 had to be withdrawn after the Gen Z protests that were witnessed across the country.
In the 2025-26 financial year, the government aims to raise Ksh3.018 trillion, a 14.7% increase from the current year's target.
The National Treasury plans to implement tax reforms, expand the tax base, and enhance compliance to achieve this goal, with a long-term aim of collecting Ksh4.4 trillion annually by 2028-29.
The ambitious revenue target is intended to fund a Ksh4.329 trillion budget, which includes increased recurrent expenditure and development spending.
However, the revenue projection leaves a Ksh759.4 billion deficit, which the government plans to address through domestic and foreign borrowing.
In particular, the Government will focus on domestic resource mobilization efforts that intend to implement the National Tax Policy and a Medium-Term Revenue Strategy (MTRS) for the fiscal years 2024/25 to 2026/27.
In the Draft 2025 Budget Policy Statement published on Wednesday, January 15, key measures include strengthening tax administration for enhanced compliance through expansion of the tax base.
The government will also leverage technology to revolutionize tax processes and seal revenue loopholes and enhance the efficiency of the tax system.
By addressing revenue leakages and improving tax efficiency, the government aims to strengthen compliance and generate additional income.
In addition to traditional taxes, the government will focus on non-tax revenues that Ministries, Departments and Agencies can raise through the services they offer to the public.
The Government will also sustain efforts to strengthen accountability, transparency and a revenue mobilization path guided by the Medium-Term Revenue Strategy – that makes the tax regime more efficient, equitable, and progressive.
“These deliberate efforts will be put in place to strike a right balance between the need to create a stronger and more reliable revenue stream and the need to protect the critical masses who have been grossly affected by the prevailing macroeconomic shocks,” read the policy in part.
According to Mbadi, implementation of the tax administrative reforms will target to reduce tax expenditures that now stand at 2.94% of GDP thereby adding revenues.
He added that the reforms will expand the tax base and strengthen tax compliance as envisaged under the MTRS and rationalize tax structure to promote domestic production and encourage investments.
In the financial year 2025/26, Kenya’s total revenue, including Appropriation-in-Aid (A-i-A), is projected to rise to Ksh 3.52 trillion, representing 18.2 percent of the country’s Gross Domestic Product (GDP).
This marks an increase from the anticipated Ksh 3.06 trillion, or 16.9 percent of GDP, in the 2024/25 fiscal year.
Of this revenue, ordinary collections—mainly taxes and other government income—are expected to contribute Ksh 3.02 trillion (15.7 percent of GDP), up from the projected Ksh 2.63 trillion (14.6 percent of GDP) in the current financial year.
The total budget for the financial year 2025/26 is projected at Ksh 4.49 trillion.
Kenya’s overall expenditure and net lending for the financial year 2025/26 is projected to increase to Ksh 4.33 trillion, equivalent to 22.5 percent of the country’s GDP, up from the estimated Ksh 3.88 trillion or 21.5 percent of GDP in 2024/25.
The projected expenditure includes recurrent expenditure of Ksh 3.08 trillion, representing 16.0 percent of GDP, which will cover government operational costs.
Development expenditure is expected to account for Ksh 804.7 billion, or 4.2 percent of GDP, focusing on infrastructure and economic growth projects.
Additionally, Ksh 442.7 billion will be allocated to county governments to support their operations, while Ksh 5.0 billion will be set aside for the Contingency Fund to address unforeseen emergencies.