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Fiscal bill in Kenya : President withdraws finance bill proposal

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Fiscal bill in Kenya : President withdraws finance bill proposal

President Ruto succumbs to popular pressure and decides to withdraw the 2024 finance bill proposal, which contained controversial tax increases. This decision follows violent protests that erupted in Kenya on June 25.

Kenya’s controversial fiscal proposals

The 2024 finance bill proposed several tax increases. According to the government, these measures are necessary to bridge a budget deficit of approximately 4.6 billion USD and fund other key public services. However, critics argue that these measures will disproportionately affect the lower and middle classes.

Protesters claim that the bill would impose unaffordable tax hikes on ordinary citizens and businesses already burdened by the high cost of living. For instance, the new excise tax on micro-lenders would directly impact borrowers, hence the population. Generation Z, characterized by its digital savvy and social consciousness, is at the forefront of the protests.

The finance bill

Taxes on basic products

The bill initially proposed introducing a 16 % sales tax on bread and a 25 % tax on cooking oil. It also planned to increase the tax on financial transactions and impose a new annual vehicle property tax amounting to 2.5 % of the vehicle’s value.

Ecotax

A tax on products contributing to waste and environmental harm was another key provision of the bill that the government proposed amending. Critics point out that this tax would increase the cost of essential items such as sanitary pads and baby diapers.

The government later stated that the tax would only apply to imported products. The ecotax also targeted digital products, including mobile phones, cameras, and recording equipment. Many Kenyans claim they rely on these products, essential to the digital economy, to make a living.

Increase in import taxes

The bill proposed raising the import tax rate from 2.5 % to 3 % of the item’s value, to be borne by the importer. This increase comes just a year after the rate was reduced from 3.5 % to 2.5 %. Protesters argue that these changes would lead to higher prices for imported goods.

The Kenyan President’s Decision Following the Protests

In a speech to the nation on Wednesday, President Ruto acknowledged the widespread opposition to the bill, stating, « It is clear that Kenyans want nothing to do with this bill and I concede. » He assured the public that he would not sign the bill into law, aiming to end the unrest.

« I also propose that over the next 14 days, a multi-sectoral and multi-party meeting be organized to chart the way forward on issues relating to the bill’s content and the auxiliary issues raised in recent days concerning the need for austerity measures and strengthening our fight against corruption, » the President explained.

On Tuesday, nationwide protests descended into chaos when demonstrators stormed the Parliament building, vandalizing the interior and setting parts of the complex on fire.

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