Ruto seeks new ideas on tax economy as poll clock ticks

Treasury CS John Mbadi has invited the public to submit recommendations on amendments to tax laws. [File, Standard]

The embattled government of President William Ruto is asking Kenyans for ideas on tax policy as it struggles to fill a growing budget gap.

With elections just a year away, rising living costs, and little room to increase taxes, the government is also under pressure to fulfill costly campaign promises.

In a public notice, Treasury Cabinet Secretary John Mbadi invited individuals, businesses, civil society groups and religious organisations to submit recommendations on specific amendments to tax laws by August 31, a deadline that compresses the usual budget consultation cycle by nearly four months and underscores the Ruto administration's growing desperation for revenue ideas.

The accelerated timeline is driven by the 2027 General Election, scheduled for August 10. Under the revised calendar, the Finance Bill, 2027, must be transmitted to parliament by January 29, with final passage due by the end of March, four months before voters head to the polls. The Mbadi-led National Treasury said it is "imperative" to begin preparations early to ensure the Finance Act is enacted before parliament breaks for the elections.

The public notice on tax policies lists seven priority areas that read like a political manifesto.

They include reducing living costs, expanding opportunities for youth and women, ensuring affordable energy, strengthening macroeconomic stability and enhancing domestic revenue mobilisation while "minimising the burden on households and businesses."

The Treasury CS said submissions should align with the government's Bottom-Up Economic Transformation Agenda (BETA), which seeks "economic turnaround and inclusive growth through a value chain approach."

The Treasury also invited proposals on East African Community Customs measures, including amendments to the Common External Tariff and Duty Remission Scheme.

Each submission must specify the tax law or provision proposed for amendment, describe the issue, provide clear justification backed by evidence, and, where applicable, identify the relevant EAC tariff line. Hard copies should be delivered to the Treasury, with soft copies sent to [e-mail] by August 31.

"The proposals received will inform the formulation of tax measures for consideration in the Finance Bill, 2027," the notice read, adding that stakeholders should ensure their ideas "reflect current domestic and global economic realities."

The Kenya Constitution and the Public Finance Management Act require citizen participation in budgeting.

The Ruto government had ruled out fresh tax hikes since deadly protests in 2024 forced Ruto to withdraw a controversial IMF-backed finance bill.

"The government is trying to build a consensus for painful measures that it cannot sell on its own," said a political analyst at the University of Nairobi. If the public proposes tax increases, the administration can say it was listening to the people."

The plea for public ideas comes as Kenyan families face mounting financial pain. Annual inflation accelerated to 6.5 per cent in July from 6.4 per cent in June, driven by a nine per cent rise in food prices and a 15.6 per cent surge in transport costs over the past year, according to data released recently by the Kenya National Bureau of Statistics.

Fresh produce has hammered household budgets. Potatoes surged 28.4 per cent year-on-year, while kale (Sukuma Wiki) a staple vegetable for most Kenyan families jumped by 26.8 per cent. City bus and matatu fares rose by 16.8 per cent annually. Cooking oil now costs Sh358 per litre, up by 3.8 per cent from a year ago, and a single room rent averages Sh4,225.

The distinction between core inflation, which stood at a relatively modest 3.2 per cent and non-core inflation at 15 per cent underscores that supply-side bottlenecks, poor harvests and global oil prices are driving the squeeze, not just monetary factors, data shows. Interest rate hikes by the Central Bank of Kenya (CBK) do little to tame food costs, leaving the Ruto administration with limited tools to ease the pain.

President Ruto swept to power in 2022 on a populist platform of lifting the "hustler" majority, promising lower living costs and inclusive growth.

But his administration has been boxed in by a toxic combination of soaring debt repayments, stagnant revenues and a hostile public mood from Kenyans clamouring for the President to deliver on his promises ahead of the next polls.

Talks with the International Monetary Fund (IMF) have stalled after the government refused to classify billions of shillings in securitised infrastructure debt as public borrowing, a dispute that has frozen access to crucial and fresh disbursements. An IMF team is expected in the country this month to revive the talks.

Without an IMF programme, the Ruto government cannot tap concessional financing or signal credibility to private creditors.

Meanwhile, revenue collections missed target by Sh84 billion in the nine months to March, and a fuel-tax cut is expected to deepen the shortfall.

Public debt servicing now consumes nearly 80 per cent of tax revenues, leaving little for development or social spending. Domestic borrowing costs have pushed commercial lending rates above 14.8 per cent, choking private sector credit.

To raise cash, the Ruto administration has turned to asset sales. In March, it netted Sh103.45 billion from selling a 65 per cent stake in Kenya Pipeline Company, the country's first major IPO in two decades. Another Sh244 billion is expected from selling its 15 per cent stake in Safaricom to South Africa's Vodacom Group. But analysts warn these are one-off fixes that do little to address structural revenue weaknesses.