Tax proposals in Sh4.24 tr budget seen to cut household spending

An analyst has urged the National Treasury to ensure that Kenyans have disposable income left after paying taxes, and called on the government to be more considerate when it comes to enhanced taxation. 

Political economist and former Senator Billow Kerrow warns that increasing taxes could backfire, resulting in lower, not higher, tax revenue for the country.

“For businesses and the public, it’s not about the revenue, it’s about what is the impact of the Finance Bill, 2025 on their lives? What is the impact on my cost of living?” he posed while speaking on Spice FM on Wednesday.

="https://www.standardmedia.co.ke/national/article/2001520658/finance-bill-2025-site-activists-demand-the-release-of-rose-njeri">Kerrow insisted tha‘‘That’s the part that the government does not want to bring out always, of the Finance Bill. The devil will be in the detail, the measures they have taken will definitely have an impact on the cost of living,’ he added. 

The comments come with just about seven days left to presentation of the Finance Bill in Parliament where Treasury Cabinet Secretary John Mbadi will be unveiling the country’s spending plan for the next one year with Budget estimates for the 2025/26 financial year, standing at a whooping Sh4.24 trillion. 

="https://www.standardmedia.co.ke/leonard-khafafa/article/2001520866/this-years-finance-bill-should-not-lead-to-loss-of-lives">This marks a notable< increase from the current financial year Sh4 trillion budget, signalling ambitious growth plans under the Bottom-Up Economic Transformation Agenda (BETA). 

Speaking on wednesday at the Senate, Mbadi, however, conceded that the government is at a point where it cannot impose more taxes on Kenyans.  “We have not made major changes in taxes that would disadvantage the taxpayer in terms of reducing their disposable income,” said Mbadi. 

He was answering questions from senators including one by Nairobi Senator Edwin Sifuna who claimed that Treasury’s veering from proposing new tax measures was on account of Gen Zs protests last June. 

“It is credit to Gen Zs who have struck the fear of God in government, they will not attempt to bring any new taxes,” said Sifuna. 

="https://www.standardmedia.co.ke/national/article/2001520873/let-views-on-finance-bill-count-ex-senator-billow-kerrow-tells-government">Mbadi admitted< to this, noting that the ‘no taxes’ Finance Bill was partly on account of Gen Zs but at the same time he does not believe that higher tax rates would necessarily lead to higher revenues. 

“I believe that the government is also sold to the idea that the point where we have reached we cannot go further to reduce disposable income,” he said, adding that the government had started evaluating the possibility of lowering Pay As You Earn (Paye) and Corporation Tax but decided to first complete reforms at Kenya Revenue Authority before considering reduction in taxes. 

In the budget for the next financial year, key sectors like health and security emerge as significant winners with boosted allocations.

However, county governments face a slight reduction in allocations. 

="https://www.standardmedia.co.ke/national/article/2001518948/public-participation-on-finance-bill-begins">The new budget,< firmly anchored in the BETA framework prioritises human capital development and national security.

Education retains its top spot, takinup Sh701.1 billion or 28.1 per cent of the total budget, earmarked for school capitation and teacher remuneration. 

The budget also reveals a strategic, yet potentially risky, shift in debt financing. For 2025/26 financial year, 71.9 per cent of new borrowing will come from domestic markets, a significant increase from 53.7 per cent in the current year (2024/25).