CS John Mbadi Rules Out VAT and Employment Tax Hikes in Upcoming Finance Bill 2025

The government will not introduce additional tax adjustments on key taxation avenues such as Value Added Tax (VAT) and employment tax in the upcoming Finance Bill 2025 set to be submitted to the National Assembly for approval, Treasury Cabinet Secretary John Mbadi has announced.

Speaking during an informal engagement with the Bunge la Wananchi caucus in Nairobi on Monday, February 3, Mbadi announced that the decision stemmed from a need to protect Kenyans from the burden of overtaxation.

The CS further pointed out that the government had reached a limit where there was no space to pursue as far as taxation of employment income is concerned. 

”The Finance Bill of this year may not have any tax adjustments upwards in terms of rates. We cannot overtax Kenyans anymore,” Mbadi announced. 

”We have reached the limit where we are saying no more space for taxation especially on employment income. You will not see any more taxes on employment income under my watch as the CS,” he added. 

Mbadi’s announcement, however, might come as a little relief for Kenyans who are already faced with the burden of taxation, mainly from deductions.

The deductions are mainly from the Social Health Insurance Fund, affordable housing, and other statutory deductions made on the salaries of Kenyans. 

On October 22 last year, the government was granted approval to proceed with the Affordable Housing Levy deductions, set at a standard rate of 1.5 per cent of an employee’s gross salary or a person’s gross income received or accrued, following a High Court ruling.

Additionally, employers were required to contribute an equivalent 1.5 per cent deduction from their employees’ salaries, bringing the total contribution to 3 per cent.

The CS further defended his proposed amendment to the Pensions Fund Act, stating that the move to exempt pension funds from taxation was intended to shield the public from excessive taxation.

Additionally, he emphasized that the government’s decision was driven by the need to encourage more Kenyans to save, ensuring better protection for senior citizens’ social pensions.

”One of the reasons as to why I brought that amendment, was to protect myself and other Kenyans when I retire so that when I get my pension I take out the whole of it without surrendering anything in the form of tax,” Mbadi stated.