Ruto, under siege, bows to pressure, withdraws some unpopular taxes

An elderly woman chants anti-government slogans in front of Kenya police officers in downtown Nairobi, on June 18, 2024. [AFP]

A cornered President William Ruto was on Tuesday forced to withdraw some of the unpopular proposals in the Finance Bill, 2024.

Unlike last year when MPs from the ruling Kenya Kwanza coalition as well as friendly parties were whipped at the State House, the lawmakers on Tuesday had to make a retreat as day-long protests against the proposals rocked the city.

After a six-hour deliberations at State House, the President succumbed to pressure and allowed the amendments that included shelving of VAT on bread, taxes on motor vehicles, and imported diapers and sanitary towels.

The Finance Bill, which was later tabled in Parliament, sought to introduce 16 per cent VAT on bread, a 2.5 per cent Motor Vehicle tax and, a Sh150 per kilogram eco-tax on plastic packaging materials, batteries and hygiene products including diapers and sanitary pads.

The proposed tax on mobile money transfers and bank transactions that would have seen the excise duty transactions hiked to 20 per cent from 15 per cent was also scrapped.

Also put aside is the controversial Electronic Tax Invoice Management System (E-tims) for small businesses and farmers that have a turnover of below Sh1 million. This means businesses which earn less than Sh83000 a month will not need to register in E-tims.

"We are going to end up with a product in Parliament that came from the Executive and has been interrogated by the Legislature. Through public participation, the people of Kenya have had a say," President Ruto told the Kenya Kwanza leaders.

He added that the government was making efforts to curb importation of products that can be locally produced, thus protecting local manufacturing and securing jobs.

"The stability you see in the foreign exchange regime is a result of our deliberate policies to reduce imports of things that are produced locally," he said.

Speaking after the meeting, the National Assembly Finance and Planning Committee chairperson, Kimani Kuria, flanked by the President and his deputy Rigathi Gachagua and the Kenya Kwanza MPs, also proposed an excise duty on imported eggs, onions and potatoes in what he described as a move to reduce competition.

On the proposal eco-levy, he said: "The proposed levy would have seen locally made products stand a risk of making them not competitive in the East African market and globally therefore this eco-levy will only be chargeable to imported finished products and therefore all locally manufactured items and especially including diapers and sanitary towels will not be subject to levy."

On the excise duty on alcohol and beverages, the government has now proposed it be charged by alcoholic content, not volume.

On the pension contributions, the Kenya Kwanza Parliamentary Group proposed to increase the amount allowable for tax exemption from Sh20,000 to Sh30,000.

National Assembly Majority Leader Kimani Ichung'wah explained their proposals sought to devote more money back into peoples' pockets "especially the employed Kenyans who have been contributing to the housing levy".

"The Housing Levy has been proposed together with the Social Health Insurance Fund and the National Social Security Fund to be tax deductible and that will ensure that what will be subjected to Pay as You Earn will be an amount less than what was there before. Disposable income will be going to many employed Kenyans," he said.

According to Ichung'wah, the proposals also sought to encourage savings and investments such as the post-retirement medical schemes.

The move by the government to climb down comes against the backdrop of pressure by citizens and civil societies, who mobilised wananchi through social media to come out to the streets to protest against the Bill.

The campaign also saw activists obtain and publish mobile telephone numbers of MPs to push them to reject the proposals.