Arrested activist, experts reveal 'hidden' traps in the Finance Bill

Rose Njeri employed her skills to create a web portal that would enable Kenyans to submit their views on the Finance Bill, 2025.

On the portal, she has pinpointed what she thinks are the thorny issues and invited Kenyans to do the same, giving them the option of adding more issues that they deem problematic in the Bill.

Through the website, they can then submit their views on the Bill to the Clerk of National Assembly, and National Assembly’s Committee on Finance and Planning.

Public participation made easy? Not so for the government, which arrested her Friday.

On the site, Njeri noted that such clauses as giving the Kenya Revenue Authority (KRA) access to personal data and imposing Value Added Tax (VAT) on basic commodities would have adverse effects on the Kenyans, even pushing the cost of basic products to levels beyond the access of many Kenyans, who are already battered by tough economic times.

The National Assembly is currently gathering views from Kenyans on the Finance Bill, 2025, in a public participation process.

Participation process

Kenyans on social media platforms noted that Njeri’s platform could be seen as among those simplifying the public participation process.

On the portal, she has taken issue with several clauses in the Finance Bill, including the proposal to give KRA sweeping powers to access private data of businesses and Kenyans, including mobile money and bank statements as well as trade secrets for firms.

She also opposes the migration of certain goods from list of VAT zero rated goods, meaning they will attract VAT at the standard rate of 16 per cent and push up cost of many goods, including essentials.

“Removing zero-rated status from essential goods will increase the cost of living and disproportionately burden low-income households. The agricultural sector, a key economic driver, will be negatively affected,” said Njeri.

She also said giving KRA unrestricted access to personal and private data, “including M-Pesa financial records,” infringes on the right to privacy guaranteed under Article 31 of the Constitution of Kenya.

She also rejects the review of the Excise Duty Act to impose excise tax on digital lenders, noting it could lead to financial exclusion for some Kenyans.

“I call for the withdrawal of this Bill as it is made in bad faith, ignorant of the current economic needs and political will of the people of Kenya,” she says on the website.

She adds that the Bill will “entrench the abuse of power by KRA, a dubious attempt to sneak in tyranny, reinforce poverty, promote marginalisation and, at the end of it, deny Kenyans the transformative agenda of Vision 2030.”

The Finance Bill, 2025, in which the Treasury refrained from proposing new tax measures, has proposed the review of the first Schedule of VAT, which contains the list of goods that are zero-rated. It has instead moved products to the list of VAT-exempt items. 

Affected products include inputs used by pharmaceutical manufacturers to produce medicaments; transportation of sugarcane from farms to milling factories; motorcycles; electric bicycles; solar and lithium-ion batteries; electric buses; raw materials for the manufacture of animal feeds; and bioethanol vapour stoves.

Treasury has also proposed the removal of certain goods from the list of VAT-exempt supplies, which will mean such goods will attract VAT at the standard rate of 16 per cent if the proposals sail through as they are.

This, analysts say, might spark a wave of new hikes on prices of goods as firms pass on the higher costs of doing business to consumers.

In explaining the different VAT-exempt and zero-rated supplies, Ken Gichinga, Chief Economist at Mentoria Economics, said zero-rated supplies are cheaper as manufacturers are allowed to claim a refund on input tax. 

“Many items have been moved from zero rating to tax exempt, this will increase the business costs which will eventually be passed on to consumers and slow down the economy,” he said.

Claim refunds

“When items are zero-rated, it means producers can claim a tax refund, and items are cheaper. When they are exempt, it means producers cannot claim refunds, which means they have to pass it on to customers and reduce other expenses such as the workforce.”

Alex Kanyi, a partner at Cliff Decker and Hofmyer noted that the cost of higher VAT would be seen in the higher cost of products in the market.

“For example, in the case of manufacturers of animal feeds, this means that the inputs they purchase for production of animal feeds will be subject to 16 per cent VAT that 16 per cent VAT has to be borne by someone. This is the farmer, for instance, rearing chickens, who will have to contend with more expensive animal feeds,” said Kanyi.

It is not the first time that the government is trying to give KRA access to private information. It made a similar attempt in last year’s Finance Bill, 2024, that was rejected following the anti-Finance Bill protests by Gen Z.

In last year’s Bill, Treasury had proposed to review the Data Protection Act to exempt KRA from the requirements of the Act when auditing taxpayers.

At the time, stakeholders raised concerns that this was against the Data Protection Act and the Bill was trying to take away the constitutional rights to privacy through the back door.

It was one of the problematic clauses that was fought during the anti-Finance Bill protests last year, which was eventually dropped when President Ruto declined to assent to it and instead withdrew the Bill. The clause has made a comeback in this year’s Finance Bill.

Tax assessments

“We hope that even the attempt that we see in financial 2025 will actually be considered and be removed. It’s a thorny issue,” said Kanyi noting there are already provisions in law that allow KRA to access data it needs to make tax assessments on individuals and Kenyans

“I think it’s high time that the government stops pursuing this particular attempt. There are good provisions within our Tax Procedures Act, which allow the Kenya Revenue Authority to collect information from you anyway, without having to infringe on personal data and trade secrets.”

KRA can, within the law, ask individuals and businesses for their financial statements, invoices, bank statements and contracts with employees and suppliers for tax assessment purposes.

“KRA can actually request this information and use it in the right way to assess whether you need to pay tax or not,” he said.

The government has in recent years been making incremental moves aimed at higher levels of access to private data from individuals and businesses.

In the Finance Act, 2023, the government introduced the Electronic Tax Invoice Management System (Etims), which validates and transmits invoices to KRA in real time, a process that requires businesses to integrate their systems with KRA systems. This would enable the taxman to see what happens within businesses in real time.

Analysts note that while there is data companies may be willing to share with KRA, there are trade secrets that give firms a competitive advantage, and in the wrong hands, it might ruin many firms.

“If I’m doing business and using a certain formula to manufacture a product, that formula is patented for some reason. It’s protected by our intellectual property rights. If another person has access to this formula and that information gets leaked out to competitors, it could mean that another firm might be able to produce a product similar to mine or of the same quality to mine, yet I’ve invested in research and development.”