Ruto Assents to Finance Bill 2025, Ushering in Sweeping Tax Reforms for Businesses
President William Ruto has officially signed the contentious Finance Bill 2025 into law, enacting a suite of new tax measures that will significantly alter the fiscal landscape for Kenyan businesses and individuals. The signing, confirmed by State House, follows weeks of heated parliamentary debate and public consultation, setting the stage for the government’s revenue-raising strategy for the upcoming fiscal year. The bill’s core objective, as stated by the National Treasury, is to expand the tax base, increase domestic revenue, and fund the ambitious Bottom-Up Economic Transformation Agenda (BETA), while attempting to balance economic growth with fiscal consolidation.
Key provisions in the new law introduce several pivotal changes for the business community. A major shift is the adjustment of the Value Added Tax (VAT) regime, including the removal of certain exemptions on previously zero-rated essential goods and a clarified framework for digital service taxes targeting multinational platforms. For corporations, the bill introduces a new minimum alternative tax based on gross turnover, a move aimed at ensuring all profitable firms contribute, even those that leverage investment deductions to reduce their taxable income. Additionally, the law formalizes and expands the scope of the controversial 1.5% Housing Levy, making it applicable to a wider range of formal incomes.
Reaction from industry stakeholders has been swift and mixed. The Kenya Private Sector Alliance (KEPSA) acknowledged the government’s need for revenue but expressed deep concern over the potential for increased cost of living and doing business. While we support fiscal responsibility, the cumulative effect of these taxes—VAT changes, the minimum turnover tax, and the housing levy—could stifle investment, reduce consumer spending, and ultimately slow economic growth, a KEPSA representative stated. Economists warn that the success of these measures hinges on prudent implementation and a simultaneous crackdown on tax evasion to avoid placing an undue burden on compliant businesses.
The long-term impact of the Finance Act 2025 now becomes the focal point. The government projects the changes will raise billions in additional revenue to fund infrastructure, housing, and agricultural subsidies. However, the business community and analysts will be closely monitoring key indicators: whether the measures successfully capture a broader tax net without discouraging formalization, their effect on inflation, and the overall health of private sector investment. The law represents a high-stakes gambit for the administration, betting that short-term fiscal pain will lead to long-term economic stability and expanded public investment. Its execution in the coming months will be critically scrutinized.