In a move set to provide much-needed relief to citizens, Treasury Cabinet Secretary (CS) John Mbadi has announced a series of significant tax cuts aimed at easing the financial burden on Kenyans.
The government’s medium-term budget strategy includes reducing the Value-Added Tax (VAT) alongside cuts to corporate tax and other levies.
Speaking at the launch of the Fiscal Year 2025/26 Budget Preparation Process on Monday, September 9, 2024, Mbadi laid out the government’s commitment to economic prudence.
He said the government would reduce taxes in the medium term: VAT from 16% to 14%, corporate tax from 30% to 25%, and adjustments to PAYE are also planned.
Mbadi emphasized that there would be no new spending increases, but instead, a strong focus on making existing funds work harder through improved efficiency, better accountability, and a more transparent allocation of resources.
To support this initiative, Mbadi revealed plans for a new financial management system designed to enhance transparency, particularly in government procurement.
This system aims to reduce wastage and corruption, ensuring that public funds are used effectively to support key sectors and drive growth.
“Our focus will be on agriculture as a driver for manufacturing and economic expansion, with an emphasis on supporting small and medium enterprises (SMEs) and housing,” Mbadi noted.
He stressed that even with financial constraints, the government is determined to promote growth and create more opportunities for Kenyans.
The Treasury’s fourth medium-term plan outlines an ambitious agenda, targeting the revitalization of agriculture, bolstering the MSME sector, expanding housing and settlement programs, improving healthcare, and building a digital superhighway.
These priority areas are expected to be the backbone of the country’s economic recovery and growth strategy.
Commenting on the current fiscal year’s budget, Mbadi noted that while implementation is already in progress, the withdrawal of the 2024 Finance Bill had necessitated a shift in strategy.
The government had to abandon some revenue-raising measures, prompting a more cautious approach to align expenditures with the resources available.
“With the 2024 Finance Bill pulled back, we had to adjust our revenue strategies,” said Mbadi.
“We are now focused on aligning our spending priorities with the current economic realities to maintain fiscal balance.”
President William Ruto on June 26, 2024, withdrew the controversial Finance Bill after nationwide anti-government protests.
The president said a majority of Kenyans had spoken loudly against Finance Bill 2024 which proposed a plethora of new taxes.
“Listening keenly to the p****e of Kenya who have said loudly that they want nothing to do with this Finance Bill 2024, I concede and therefore I will not sign the 2024 Finance Bill and it shall subsequently be withdrawn,” Ruto said.
In August 2024, Mbadi hinted at reviving some tax proposals from the controversial Finance Bill 2024.
The Treasury CS said he was introducing an Omnibus Bill with amendments to the tax laws, bringing back some measures from the earlier Finance Bill.
An Omnibus Bill, which combines multiple provisions into one package, allows for the swift passage of diverse measures, though it can limit detailed debate and scrutiny.
Omnibus bills are often used to pass numerous provisions quickly, but they can limit opportunities for detailed debate and scrutiny. They are commonly employed in budget and appropriations legislation to streamline the legislative process.