Treasury Cabinet Secretary John Mbadi has announced plans to ease the tax burden on Kenyan workers in the upcoming financial year.
Speaking at the Bunge la Mwananchi forum at Jeevanjee Gardens in Nairobi on February 3, Mbadi made firm commitments regarding the Finance Bill 2025.
No more taxes under my watch – Mbadi pic.twitter.com/LgcP9oRBsK
— Tujue Media (@TujueMedia) February 4, 2025
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Employment Tax Relief
The CS took a strong stance against further taxation of employment income, stating:
“We cannot overtax Kenyans anymore. We have reached a limit where we are saying no more space for taxation, especially on employment income, under my watch.”
Regarding Value Added Tax (VAT), Mbadi was equally decisive:
“We are not increasing VAT at all actually, the finance bill this year may not have any tax adjustment upward in terms of rates.”
Current Tax Burden on Employees
The Federation of Kenya Employers (FKE) has revealed concerning statistics about the current tax situation. According to FKE director-general Jacqueline Mugo, employees are losing nearly half their earnings to various deductions and taxes.
FKE CEO Jacqueline Mugo had warned that high taxes & deductions were crippling employers, with 57 companies announcing layoffs since 2022. Atwoli insists the figures are exaggerated.
— Kawangware Finest ™ (Geoffrey Moturi) (@cbs_ke) January 29, 2025
The situation has worsened under President William Ruto’s administration due to multiple new tax implementations.
Mugo expressed serious concerns about the sustainability of current tax levels:
“Clearly, if we continue raiding the pay slip, we will not have any income. So what will they do? They will have to keep borrowing; they will be distressed, and that eventually translates to social unrest. Then people begin to wonder what the value of being employed is. In our calculation, about 45 to 50% of employees’ salaries are going to tax and deductions.”
Debt Challenges and Future Outlook
Despite the promised tax relief, Mbadi cautioned about ongoing financial challenges. During the forum, attended by KRA chairman Ndiritu Muriithi, he discussed several critical points:
– The country’s significant debt burden continues to impact economic decisions
– Kenya’s close call with Eurobond default in 2024 led to currency depreciation
– The upcoming Eurobond repayment in 2027 presents additional challenges
– Recent Moody’s credit rating upgrade could help secure more favorable borrowing terms
The Treasury CS emphasized that while employment taxes will not increase, broader financial relief may take time due to existing debt obligations and repayment schedules.
