Ruto Yields to Pressure, Overhauls Controversial Tax Measures

President William Ruto's administration has demonstrated responsiveness to public sentiment by revising several contentious tax proposals outlined in the initial Finance Bill 2024.

The revisions announced at State House Nairobi signify a victory for various stakeholders, including bread consumers, vehicle owners, pensioners, and farmers, who had voiced concerns over the proposed measures. The revised bill, which will be presented to Parliament, has undergone substantial modifications to alleviate the burden on citizens and industries. One notable change is the elimination of the proposed 16 per cent value-added tax (VAT) on bread, a staple food item whose taxation had sparked widespread uproar. Additionally, the government has scrapped VAT on the transportation of sugarcane, financial services, and foreign exchange transactions, providing relief to the agricultural sector and financial service users who had braced for increased costs.

In a move aimed at enhancing the financial well-being of employees, contributions to the housing levy and the Social Health Insurance Fund will now be exempt from the taxable income considered for Pay As You Earn (PAYE) calculations. This adjustment is expected to slightly increase the net income of salaried workers, offering them a reprieve amidst rising living costs. The government has also taken measures to protect local producers by imposing excise duty solely on imported eggs, onions, and potatoes, shielding them from undue competition. Moreover, the Eco Levy will now only apply to imported finished goods, a modification anticipated to significantly benefit women and girls.

Trade Cabinet Secretary Moses Kuria today conveyed these amendments following a Parliamentary Group Meeting led by President Ruto. This efforts are aimed at consolidating support for financing the ambitious Sh3.9 trillion budget for the 2024/25 fiscal year. The revisions were prompted by widespread demonstrations in Nairobi under the banner #OccupyParliament, where protesters took to the streets to voice their opposition to the original bill. Kuria emphasizes that the revised bill presented to Parliament is "substantially different from the original," reflecting the government's responsiveness to public sentiment and its willingness to reconsider its fiscal strategies in light of economic realities and citizen concerns.

Small businesses have also received a favourable adjustment, with the threshold for VAT registration being raised from Sh5 million to Sh8 million, exempting many from the need to register for VAT. Furthermore, the Electronic Tax Invoice Management System (ETIMS), recently introduced by the Kenya Revenue Authority (KRA), has been abolished for farmers and small businesses with an annual turnover of less than Sh1 million, alleviating their administrative burdens. Alcohol consumers have not been entirely spared with proposed taxes remaining in place, however, slight modifications have been made to taxation methods.

On the education front, an allocation of Sh18 billion has been made for the employment of all 46,000 junior secondary teachers currently serving as interns. National Assembly Majority Leader Kimani Ichung'wah has urged Kenyans to maintain peace, asserting that public feedback has significantly influenced the revisions made to the proposed legislation.