John Mbadi, the Treasury Cabinet Secretary, has defended the Finance Bill proposal, emphasizing that the government’s approach centers on expanding the tax base and enhancing tax collection efficiency rather than imposing additional tax obligations on Kenyan citizens.
According to Mbadi, the National Treasury intentionally refrained from raising tax rates in response to concerns previously voiced by Kenyans during the 2024 Finance Bill discussions.
“Building on past experiences and specifically the 2024 debates, we made the decision not to increase tax rates for Kenyans. Their complaints that the current tax burden is excessive are entirely justified,” stated Mbadi.
During a live media engagement at the University of Nairobi, the Cabinet Secretary explained that the current Finance Bill primarily targets administrative reforms designed to close tax loopholes and ensure greater participation from Kenyans in the tax system.
The Treasury Secretary noted that his department had embraced a more transparent and inclusive methodology in crafting the legislation, asserting that numerous proposals emerged directly from public contributions.
“For the first time in our nation’s history, I believe we in the Treasury have demonstrated genuine openness and transparency. We have maintained communication with the Kenyan public from the very start,” he stated.
“It’s important to recognize that the Finance Bill isn’t merely drafted internally and presented to citizens. Many elements included in the bill originate from Kenyans themselves through active engagement. We publish notices and solicit public perspectives,” he added.
The Cabinet Secretary explained that feedback gathered through public participation is consolidated by Treasury staff and subsequently presented to him for final consideration.
Mbadi contended that numerous Kenyans with the financial means to contribute to taxes remain outside the tax system, thereby shifting excessive responsibility onto those who already comply.
“Many Kenyans with greater financial resources than current taxpayers are not fulfilling their tax obligations. Our focus is on identifying these individuals,” he stated.
The Treasury Secretary elaborated that expanding the tax system would reduce financial strain on wage earners and other individuals who consistently fulfill their tax duties.
“Broadening the tax base essentially involves bringing more Kenyans into the tax system so that current taxpayers are not left to shoulder the entire burden alone. Instead, we aim to lessen their individual load while increasing overall tax participation,” Mbadi clarified.
During the discussion, student Brian Farah inquired about the reasons for previous failures in expanding the tax base and asked about the government’s enforcement strategy for the new initiatives.
In addressing the query, the Cabinet Secretary acknowledged that inadequate systems and antiquated tax collection techniques had resulted in historically low compliance rates.
“Consider how our economy has fundamentally transformed toward technology and digital platforms. Yet, our tax collection processes remain overly manual and outdated. We are actively transitioning away from these methods,” he explained.
The Treasury Cabinet Secretary disclosed that the government had provided extra financial resources to the Kenya Revenue Authority to upgrade and digitalize the tax collection infrastructure.
According to the Secretary, the Treasury anticipates generating approximately Sh54 billion through the proposed tax initiatives, with an additional Sh30 billion expected from tax amnesty programs.
He clarified that the amnesty program specifically targets individuals whose tax cases have already been resolved in the government’s favor through tax tribunals.
“This includes Kenyan citizens, business operators, and individuals facing liquidity constraints. Under this amnesty, they are exempt from interest and penalties on assessed taxes, required only to pay the principal amount,” Mbadi elaborated.
The Cabinet Secretary additionally mentioned that the government is focusing on self-employed professionals and property owners whom it suspects are paying less than their fair share of taxes.
“Examining our economic structure, the ratio of formally employed individuals to those generating income from businesses and professional activities is nearly equal. However, personal income tax from the latter category amounts to only Sh50 billion,” he stated.
“In contrast, personal income tax from payroll employees reaches Sh600 billion.”
The Treasury Secretary highlighted professionals including dentists and accountants as examples of self-employed Kenyans the government aims to fully integrate into the tax system.
“This disparity stems from professionals like dentists who earn substantial incomes but evade taxes, as well as accountants who manage financial records without fulfilling their tax obligations. There are numerous such cases. I’m specifically referring to these self-employed individuals, who are our primary targets,” he explained.
He also identified property owners as a focus group, noting that tax compliance regarding rental income remains poor despite the prevalence of property ownership nationwide.
“Currently, we collect only Sh17 billion in rental taxes despite the widespread ownership of properties and buildings generating rental income. Even with our modest 7.5% rate, compliance is lacking. These individuals represent another key target group for us. We insist they contribute their equitable portion of taxes,” Mbadi declared.