Kenya’s Finance Bill 2025 Faces Widespread Opposition Over Tax Proposals

As Kenya advances toward the implementation of the Finance Bill 2025, stakeholders across various sectors are vehemently opposing its proposed tax reforms, cautioning against potentially severe repercussions for businesses, households, and the overall economy. 

The Finance and National Planning Committee, led by Molo MP Kuria Kimani, is currently conducting public hearings to gather feedback, with sessions in Nairobi and planned visits to ten counties beginning July 2. The committee has already received over 1,000 online memoranda and heard oral presentations from over 200 stakeholders, and is encouraging further public engagement through an online QR code platform, as emphasised by MP Kuria Kimani. At the heart of the controversy are provisions that would increase taxation on essential goods, reduce incentives for affordable housing development, and potentially infringe on personal and trade-related privacy, which critics argue could destabilise the economy and harm public welfare. 

The most immediate concern revolves around the rising cost of living. One of the most contentious proposals involves shifting essential goods from zero-rated to standard VAT at 16 percent, a move that stakeholders warn could accelerate inflation and increase the cost of living for ordinary Kenyans. Consumer advocacy groups and industry players alike are concerned that reclassifying basic necessities under standard VAT could push food prices and household expenses even higher, exacerbating the financial strain on low-income earners.

Industry representatives emphasise that the timing of these tax changes is particularly ill-advised, given Kenya's ongoing struggles with inflation and economic recovery. Businesses are bracing for reduced consumer spending if essential goods become significantly more expensive, potentially stifling economic growth and disrupting market dynamics. Equally alarming is a clause within the Bill that would grant the Kenya Revenue Authority (KRA) exclusive rights to access trade secrets, customer information, and personal data from businesses. Legal experts and privacy advocates are vehemently opposing this provision, warning that it contradicts existing laws under Article 31 of the Constitution and the Data Protection Act.

Stakeholders contend that granting tax authorities unrestricted access to private financial and business data could tarnish Kenya's reputation as a technology and financial hub, deterring investors wary of regulatory overreach and eroding confidence in the business environment. Telecommunications firms, including Safaricom and American Tower Company Kenya Ltd, have voiced particular criticism of the proposal, underscoring its potential to undermine trust and confidence in the country's business environment.

Furthermore, property developers, spearheaded by the Kenya Property Developers Association, have rejected provisions that would eliminate critical tax incentives for companies constructing mass residential units. Under existing law, developers building at least 100 housing units annually receive tax rebates, a measure designed to encourage affordable housing initiatives. The proposed repeal of these incentives is seen as counterproductive to the government's agenda of increasing access to low-cost housing.

Rose Kananu, Managing Director of the association, says that the Finance Bill contradicts the government's stated objective of promoting affordable housing through tax incentives. Developers warn that scrapping these rebates will drive up property prices, making housing less affordable for Kenyans and discouraging further investment in large-scale residential projects, thereby undermining the goal of providing accessible housing.

The aviation industry has also raised significant concerns, cautioning that new tax measures on aircraft and aircraft parts could severely impede operations. Mbuvi Ngunze, Chair of the Kenya Association of Air Operators, has cautioned that introducing VAT, Railway Development Levy, and Import Declaration Fees on aviation equipment would lead to higher costs for airlines, making purchases and leasing significantly more expensive.

These increased costs could reverberate throughout the sector, affecting ticket prices, airline profitability, and Kenya's status as a competitive aviation hub in the region. Air operators are urging legislators to reconsider these tax policies, warning that the aviation industry may struggle to maintain its growth trajectory under heavier financial burdens, impacting both domestic and international travel.

Beyond specific industry concerns, stakeholders have taken issue with a proposal limiting tax loss carry-forward periods to five years. 

Current regulations allow companies to carry forward losses indefinitely, providing relief for capital-intensive businesses that experience long-term deficits due to substantial initial investments. Telecommunications and technology firms, including Safaricom, argue that capping loss carry-forward undermines investor confidence and penalises companies undertaking large-scale infrastructure projects, potentially deterring long-term investments. 

Similarly, the East African Device Assembly Kenya Ltd has urged lawmakers to exempt VAT on raw materials and components used in local smartphone manufacturing to support the industry and lower production costs, thereby promoting local manufacturing and technological advancement. Ride-hailing platforms such as Uber and Bolt have strongly opposed a proposed requirement that would mandate the real-time issuance of eTIMS invoices for every transaction. Representatives from these companies argue that such a measure is impractical given the high volume of transactions processed daily, warning that it could create operational inefficiencies and disrupt service delivery.

Stakeholders maintain that while tax compliance is important, the government must develop realistic frameworks that accommodate the practical realities of digital platforms rather than imposing rigid regulatory requirements that burden businesses and stifle innovation, emphasising the need for balanced regulation.

The Alcoholic Beverages Association of Kenya (ABAK) welcomed a shift in excise tax calculation for undenatured extra neutral alcohol, which will now be taxed on a per-volume basis rather than alcohol-by-volume. The revised rate has been lowered from Sh964 per litre to Sh500 per litre, a move that industry leaders say could help stabilise market prices and promote fair competition.

However, Abak Chairman Eric Githua expresses concerns that Kenya's tax rate remains disproportionately higher than those in neighbouring Tanzania and Uganda, where ethanol is taxed at significantly lower rates. Industry representatives argue that this discrepancy encourages cross-border smuggling and fuels the illicit alcohol trade, undermining local producers and eroding government revenues.

The Finance and National Planning Committee's ongoing efforts to collect public feedback underscore the importance of stakeholder engagement in shaping the final legislation.