Nairobi — The National Treasury is proposing tax cuts, Cabinet Secretary (CS) John Mbadi has announced.

The plan includes reducing valued-added tax (VAT) from 16 percent to 14 percent, cutting corporation tax from 30 percent to 25 percent, and lowering pay-as-you-earn (PAYE) rates, though the exact reduction for PAYE is unspecified.

This proposal is part of the Treasury's medium-term revenue strategy aimed at improving tax administration, enhancing compliance, and expanding the tax base.

"I will surprise you; in the medium term, we want to reduce tax rates. We are not looking at increasing taxes," said CS Mbadi during the unveiling of the 2025/26 Budget Preparation Process in Nairobi.

For the financial year ending June 30, 2024, the Kenya Revenue Authority collected Sh313.37 billion in domestic VAT and Sh488 billion in corporation taxes.The proposed tax cuts come after the suspension of the 2024 Finance Bill, which aimed to introduce Sh346 billion in new taxes but faced backlash and anti-government protests.In response, the government cut expenditures by Sh177 billion and borrowed Sh169 billion to address the deficit, affecting key projects like hiring junior secondary school teachers.