Kenyan President William Ruto has announced his decision to withdraw a finance bill containing controversial tax hikes following deadly protests, which resulted in parliament being set ablaze on Tuesday. In a national address, President Ruto acknowledged the strong opposition from the public, stating that it was clear that Kenyans “want nothing” to do with the bill. “I concede,” he declared, affirming that he would not sign the bill into law.

The protests on Tuesday were intense and tragic, with at least 22 people killed, as reported by the state-funded Kenya National Commission on Human Rights (KNHRC).

Controversial Tax Proposals and Public Outcry

The Finance Bill has been a source of significant controversy in Kenya since its introduction. The original version of the Bill proposed a series of new taxes, including a 16 percent VAT on bread, excise duty on vegetable oil, VAT on sugar transportation, a 2.5 percent Motor Vehicle Tax, and an Eco Levy on locally manufactured products. These proposals sparked widespread public outrage and protests, leading to the government dropping some of the most contentious measures.

Despite these concessions, many Kenyans remain dissatisfied with the Bill. Critics argue that the government’s alternative revenue-raising measures, such as increased fuel prices and export taxes, will still disproportionately burden ordinary citizens who are already grappling with a high cost of living.

Key Provisions of the Finance Bill

Some of the key tax proposals that remain in the Bill include:

• A 20% tax on income earned by non-residents and a 5% tax for residents operating or owning digital marketplaces or facilitating digital content monetization.
• The removal of VAT exemptions for betting, gaming, and lottery services, bringing them under the standard 16% VAT bracket.
• The replacement of the Digital Service Tax (DST) with a Significant Economic Presence Tax (SEPT) levied at a rate of 30% on the deemed taxable profits of non-resident companies offering services through a digital marketplace in Kenya.
• The removal of VAT exemptions for various financial services, including credit and debit card issuance, telegraphic money transfers, foreign exchange transactions, cheque handling and processing, issuing financial securities, assigning debt for a fee, and providing financial services for a commission.

Banking Sector Concerns

The proposed 16% VAT on financial services has drawn particular criticism from the Kenya Bankers Association (KBA). The KBA argues that this tax would disproportionately affect low-income earners and small businesses and could hinder economic growth by making Kenyan exports less competitive and discouraging investment in key sectors like tourism.

Protests and Public Discontent

The Finance Bill has fueled widespread public discontent, with thousands of Kenyans taking to the streets in major cities to protest the proposed tax hikes. Demonstrators have expressed concerns about the rising cost of living and the government’s economic policies. While the protests have been largely peaceful, there have been isolated clashes with police in Nairobi.

Government’s Justification

The government has defended the proposed tax hikes as necessary to fill its coffers and reduce reliance on external borrowing. However, critics argue that the government should focus on cutting wasteful spending and tackling corruption instead of burdening ordinary citizens with additional taxes.

What’s Next?

With MPs on recess until July 23, it remains to be seen how quickly Parliament will be able to address the President’s reservations and whether the Bill will ultimately be passed into law. The ongoing debate over the Finance Bill highlights the deep divisions in Kenyan society over economic policy and the government’s priorities.