In the past few weeks young people in Kenya and Africans worldwide have been protesting against a new tax bill introduced by Kenya’s government. Like many African countries, Kenya struggles with economic growth and corruption. The new Finance Bill 2024, aimed to tackle economic instability but has caused public outrage instead. This blog post explores the intricacies of the Finance Bill, its anti-corruption measures, and the public’s vehement opposition.

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Kenya’s Debt Crisis[1]

When President Ruto took office in August 2022, Kenya had an external debt of $62 billion. The previous president, Uhuru Kenyatta, had borrowed money for big infrastructure projects, leading to high-interest loans. By 2024, Kenya’s debt had increased to $82 billion, owed to countries like China, the US, and organizations like the International Monetary Fund(IMF) and the World Bank. In 2021, Kenya agreed to an IMF programme to help manage this debt, which included loans conditioned on raising taxes and cutting government spending. This relief came in the form of a 38^th month programme to help Kenya manage its debt and create a conducive economic environment for investments. Kenya was set to acquire $3.9 billlion in funding from the IMF with a separate climate fund of $542 million for climate fund. The loans were conditioned on hiking taxes, reducing subsidies and cutting back on governmental spending.

The Finance Bill 2024 [2]

The Finance Bill 2024, introduced on May 9th, aimed to generate $2.7 billion to address the budget deficit and fund development programs. However, it included several contentious tax measures:

1. Motor Vehicle Tax: A 2.5% tax on the value of motor vehicles, payable when issuing insurance coverage.
2. Withholding Tax on Goods Supplied to Public Entities: A 3% tax for resident suppliers and a 5% tax for non-residents.
3. Tax on Digital Content and Marketplaces: A 20% tax for non-residents and a 5% tax for residents involved in digital content creation and digital marketplaces.
4. Significant Economic Presence Tax: A 30% tax on deemed taxable profit, replacing the Digital Service Tax.
5. Tax on Infrastructure Bonds: Interest income from infrastructure bonds would be taxable.
6. Tax on Family Trusts: Income of registered family trusts would be subject to tax.
7. VAT on Betting and Gaming: Betting, gaming, and lottery services would be subject to a 16% VAT.
8. Increased Excise Duty on Money Transfers: Excise duty on money transfer services would increase from 15% to 20%.

Efforts to Tackle Corruption:

The bill also included measures aimed at tackling corruption, a long-standing issue in Kenya’s public sector. These measures involved:

• Establishing robust mechanisms for monitoring government spending and ensuring compliance with financial regulations.
• Increasing fines and prison terms for individuals and entities found guilty of corruption.
• Mandating the publication of detailed reports on government revenues and expenditures to promote public scrutiny.

A BIG NO!

The Finance Bill 2024 faced significant opposition from the public. Many Kenyans argued that the increased taxes would disproportionately affect the lower and middle classes, exacerbating economic hardships. Given Kenya’s history of corruption, there was widespread skepticism about the government’s commitment to using the additional revenue for ACTUAL public good. Kenyans have even pointed out that the bill seemed rushed, with its introduction in May 2024 and implementation set for July 1st 2024, leaving little time for thorough analysis and public input. These grievances led to widespread protests, demanding the bill’s withdrawal and greater accountability from their leaders.

Current Status

As of July 2024, President Ruto announced his refusal to sign the Finance Bill 2024 on June 26, 2024. The bill has been withdrawn and sent back to the National Assembly for further consideration and potential amendments.

In an effort to address the public’s grievances and to cut back on government spending, President Ruto initiated a major shake-up of measures within his own administration by firing several Cabinet members on July 11, 2024. These measures included the dissolution of 47 State Corporations, suspending the filling of Chief Administrative Secretaries positions, reducing the number of government advisors by 50%, and cutting non-essential travel and participation in public contributions by state officers. Although the measures taken were valiant, Kenyans and Africans in the diaspora are eager to see what’s next for President Ruto and Kenya.

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[1] Aljazeera: What do the IMF and foreign debt have to do with Kenya’s current crisis?

[2] Kenya: The Finance Bill 2024, Bowmans, www.Bowmanslaw.com/insigights/kenya-the -fiance-bill-2024/