MPs revise Finance Bill 2025 to avert Gen Z backlash
By Mercy Mwai, June 18, 2025Lawmakers have proposed deleting several controversial clauses from the Finance Bill to prevent a backlash similar to last year’s Gen Z-driven protests.
The Finance and National Planning Committee, chaired by Molo MP Kuria Kimani, has rejected multiple proposals by the Kenya Revenue Authority (KRA) and National Treasury, citing constitutional concerns and ongoing reviews.
Rejected proposals
Personal data access: MPs rejected KRA’s proposal for unrestricted access to personal data for tax compliance, arguing it violates Article 31(c) and (d) of the Constitution, which guarantees privacy rights.
The committee noted that Section 60 of the Tax Procedures Act already provides sufficient authority for data access through judicial warrants.
PAYE tax bands: The committee rejected proposed expansion of tax bands to 10 per cent, 17.5 per cent, 25 per cent, 27.5 per cent and 30 per cent, which would have empowered the Cabinet Secretary to adjust rates by up to 10 per cent every three years for inflation.
Corporate tax incentives: MPs opposed eliminating the 15 per cent corporate tax rate for companies engaged in local motor vehicle assembly and construction of at least 100 residential housing units, viewing retention as necessary for policy stability and long-term investment.
Zero-rated reclassification: The committee rejected Treasury’s proposal to reclassify certain commodities from zero-rated to exempt status, instead maintaining zero-rated status for locally assembled mobile phones, motorcycles, electric bicycles, solar batteries, electric buses, animal feed inputs, and bioethanol vapour stoves.
Approved measures
Pension tax exemption: Lawmakers supported full tax exemption for all pension payments, whether received as lump sums or instalments, creating clarity by repealing redundant provisions.
Excise duty on alcohol: The committee retained the Ksh500 excise duty per litre on Extra Neutral Alcohol (ENA) for licensed spirituous beverage manufacturers, providing relief to manufacturers already facing increased duties.
Digital services tax: MPs supported expanding the Significant Economic Presence Tax (SEPT) definition to include websites and electronic networks beyond digital marketplaces. However, they opposed the Sh5 million threshold, arguing it creates revenue leakage loopholes and hinders KRA enforcement.
Minimum top-up tax: The committee endorsed this measure to align with global tax initiatives adopted by over 60 countries, ensuring multinational corporations pay their fair share and maintaining Kenya’s position in international tax reforms.
Withholding tax: MPs approved introducing withholding tax on payments to non-resident ship owners to enhance compliance and strengthen revenue collection.
Policy rationale
The committee’s decisions reflect principles of equity, efficiency, and simplicity, aligning with the Medium-Term Revenue Strategy and national development goals.
Their approach aims to optimise revenue while safeguarding economic inclusivity and investment incentives.
“The committee’s position is guided by clear policy rationale to uphold constitutional rights while ensuring effective tax administration through lawful and accountable means,” the report says.
“Protecting personal privacy and adhering to judicial oversight reinforces public trust and aligns Kenya’s approach with international best practices.”