Kenya Finance Bill 2024 Explained

The Kenya Finance Bill 2024 was a piece of legislation that proposed changes to the tax system of Kenya,^[1] which involves tax increases.^[2] The proposed bill aims to raise 346 billion Kenyan shillings (KSh) to pay off debt and fund development projects.^[3] It was first introduced in May 2024 and has been controversial,^[4] with some provisions facing public outcry.^{[5] [6] [7] [8]} The proposal sparked the Kenya Finance Bill protests and public opposition.^{[9] [10]} On 25 June 2024, Parliament approved the Finance Bill despite ongoing protests; however, President William Ruto declined to sign it into law the following day after an assault incident in the Parliament of Kenya.^{[11] [12] [13]}

On 28 June, President Ruto rejected the Finance Bill and ordered a KSh 346 billion budget cut. Concurrently, he signed the "Appropriations Bill 2024" into law. These budget cuts impacted national and county governments, including the executive, legislature, judiciary, and constitutional commissions. The National Treasury was instructed to prepare supplementary estimates to reflect these reductions and limit spending to essential services. Ruto emphasized that these measures were necessary to offset the revenue shortfall caused by the rejection of the Finance Bill.^[14]

Background

The Kenyan government agreed to a US$2.34 billion loan with the International Monetary Fund in April 2021 to address funding shortfalls related to the impacts of the COVID-19 pandemic and existing national debt. Conditions of this loan included government reform.^[15] Finance Minister Njuguna Ndung'u announced value added tax increases, removal of subsidies, and expansion of the tax base under guidance of the IMF and World Bank in the 2023 Finance Bill.^{[16] [17] [18]} In 2023, the World Bank warned the plans would negatively affect economic growth,^[19] though the IMF supported more reforms to remain compliant with the terms of the loan, necessitating similar further measures in the 2024 Finance Bill.^{[20] [21]}

Provisions

Provisions of the bill that survived to the third reading included:

• As of 21 June, a 1.5% tax on local digital platforms that offers services including online jobs, rentals, food delivery, and ride hailing, subject to parliamentary approval.
• As of 21 June, a value-added tax on electric bikes, buses, and solar and lithium-ion batteries. The Associated Battery Manufacturers, a Nairobi-based group, has criticized this, stating that it would increase the cost of a solar battery in Kenya by $312 (45,000 Kenyan shillings).
• As of 21 June, a 6% Significant Economic Presence tax. This would charge additional taxes to non-residents who make money in Kenya through digital platforms,^[22] and has generated uproar from ride-hailing companies like Bolt and Uber, who state concerns that they would be forced to leave.

Provisions of the bill removed or modified after protests included:

• A 16% value-added tax on bread and the transportation of sugar cane.^[23]
• A 15% to 40% value-added tax on financial services and foreign exchange transactions.
• A 16% value-added tax on imported table eggs, onions and potatoes.
• An increase from 15% to 20% in the excise tax on mobile money transfer charges.
• An 25% excise duty on vegetable oil, which, according to the Kenyan Association of Manufacturers, could have spiked the price of soap by 80%.
• A tax on motor vehicle owners requiring them to annually pay 2.5% of their car's value, with a minimum of KSh 5,000 and a maximum of KSh 100,000.

An "Eco Levy", aiming to stop pollution and excess waste at the office/household level, which affects diapers, batteries/dry cells, smartphones, earphones, clocks, radios, TV sets, and cameras, as well as plastic packaging materials and a variety of other products,^[24] was curtailed to only affect imported products.

Status

First reading

The Finance Bill 2024 was introduced in May and had its first reading in Parliament on 13 May 2024.^[25]

Amendments

Amidst protests, the Kenyan government scrapped parts of the bill on 18 June 2024. According to Kuria Kimani, chairman of Kenya’s Finance and National Planning Committee, the proposed tax increases that were scrapped included a 16% value-added tax (VAT) on bread, as well as taxes on motor vehicles, vegetable oil, and mobile money transfers.^[26] This did not satisfy protestors, who demanded that the entire bill be abandoned.

Second reading

The second reading of the Finance Bill took place on 20 June 2024, where members of parliament voted on the general outline of the proposed law. The bill passed the second reading with 204 members voting for the bill, while 115 opposed it. No members abstained from the vote.^[27]

Third reading and storming of the Parliament

On 24 June, lawmakers met at the Parliament of Kenya and Parliament approved the finance bill despite the protests. It was expected to be presented on 27 June to President William Ruto to sign into law. However, on 26 June 2024, Parliament of Kenya was stormed by the protestors,^{[28] [29]} resulting in deaths and injuries.^[30] As a result, the President declined to sign the bill, acknowledging that the Kenyan people "want nothing" to do with it.^[31] The bill therefore remained withdrawn in totality.^[32]

External links

• The Finance Bill, 2024, Parliament of Kenya (version of 9 May 2024)

Notes and References

1. Web site: Kenya Gazzette Supplement . dead . https://web.archive.org/web/20240623141702/http://www.parliament.go.ke/sites/default/files/2024-05/Finance%20Bill%2C%202024_0.pdf . 23 June 2024 . 26 June 2024.
2. Web site: 2024-06-20 . Thousands of Kenyans demonstrate against proposed tax increases . 2024-06-23 . Voice of America . en.
3. Web site: 2024-06-18 . More than 200 arrested in Kenya protests over proposed tax hikes in finance bill . 2024-06-23 . Voice of America . en.
4. Web site: AriseNews . 2024-06-21 . Kenya's Parliament Approves Controversial Finance Bill Despite Public Outcry . 2024-06-22 . Arise News . en-US.
5. Web site: 2024-06-21 . Kenya Finance Bill 2024 passes second reading amid public outcry . 2024-06-22 . en-US.
6. Web site: 2024-06-18 . Finance Bill 2024: Kenyans protest ova bread tax, odas make goment do U-Turn . 2024-06-22 . BBC News Pidgin.
7. Web site: Ndege . Adonijah . 2024-06-20 . BREAKING: Kenya's Finance Bill passes second reading despite protests . 2024-06-22 . TechCabal . en-US.
8. Web site: Kenya finance bill 2024: Bread and other tax proposals axed amid public outcry . 2024-06-22 . www.bbc.com . en-GB.
9. Web site: Protests in Kenya: Gen Z takes to the streets – DW – 06/20/2024 . 2024-06-22 . dw.com . en.
10. Web site: 2024-06-20 . Thousands of Kenyans demonstrate against proposed tax increases . 2024-06-22 . Voice of America . en.
11. Web site: Several killed as Kenyan police open fire on anti-tax bill protesters . 2024-06-25 . Al Jazeera . en.
12. Web site: 200 Injured, 100 Arrested As Kenya Tax Protests Turn Violent . 2024-06-23 . NDTV.com.
13. News: Holland . Hereward . Kenya's Ruto rejects tax bill, returns it to parliament, local media reports . 26 June 2024 . Reuters . 26 June 2024.
14. Web site: Dominic. Omondi. 2024-06-28 . President Ruto directs Sh346 billion budget cut after Finance Bill rejection . 2024-06-30 . Business Daily . en.
15. https://www.imf.org/en/News/Articles/2021/04/02/pr2198-kenya-imf-executive-board-approves-us-billion-ecf-and-eff-arrangements IMF Executive Board Approves US$2.34 Billion ECF and EFF Arrangements for Kenya
16. https://www.theeastafrican.co.ke/tea/business/imf-world-bank-fingerprints-on-ruto-26bn-budget-4272454 IMF, World Bank fingerprints on Kenya's $26bn budget
17. https://www.theeastafrican.co.ke/tea/business/imf-approves-usd447-loan-to-kenya-4060866 IMF agrees to lend Kenya $447 million for budgetary support
18. https://www.theeastafrican.co.ke/tea/business/imf-backs-revenue-plan-by-ruto-4139144#google_vignette IMF backs Ruto's plan to raise taxes, target cheats, expand base
19. https://www.theeastafrican.co.ke/tea/business/world-bank-kenya-tax-plans-to-hurt-purchasing-power-4262758 World Bank: Kenya tax plans to hurt purchasing power
20. https://www.businessdailyafrica.com/bd/economy/kenya-heads-into-fifth-review-as-imf-grip-on-economic-policy--4302432 Kenya heads into fifth review as IMF firms grip on economic policy
21. https://www.standardmedia.co.ke/business/business/article/2001496985/imf-world-bank-at-odds-on-tax-kenya-policies IMF, World Bank at odds on tax Kenya policies
22. Web site: Okorie . Ifeoma Joy . 2024-06-06 . Bolt and Uber dissatisfied with Kenya's proposed SEP Tax . 2024-06-27 . TechPoint Africa . en-US.
23. Web site: Okubusu . Derrick . 2024-06-18 . Comprehensive List of All 16 Changes in Finance Bill 2024 After Ruto's State House Meeting . 2024-06-27 . Kenyans.co.ke . EN.
24. Web site: Malesi . Tony . 18 June 2024 . Kenya's new Eco Levy sparks debate: A waste management silver bullet or just another tax? . 2024-06-27 . DownToEarth . en.
25. Web site: Kenya parliament advances Finance Bill 2024 amid protests . 2024-06-22 . techpoint.africa. 21 June 2024 .
26. Web site: Madowo . Caitlin. Danaher. Larry . 2024-06-18 . Kenyan government scraps elements of controversial tax bill amid protests . 2024-06-26 . CNN . en.
27. Web site: Misiko . Harry . 2024-06-20 . 204 MPs approve Finance Bill in Second Reading, 115 reject . 2024-06-22 . NTV Kenya . en.
28. Web site: Kiplagat . Sila . 2024-06-26 . What next after MPs passed the Finance Bill 2024? . 2024-06-26 . Business Daily . en.
29. Web site: Musambi . Evelyne . 25 June 2024 . Part of Kenya's parliament burns as thousands of protesters enter. Bodies seen after police bullets . SFGate.
30. Web site: Pietromarchi . Virginia . Gadzo . Mersiha . 2024-06-26 . Kenya tax protests updates: Ruto declines signing finance bill after unrest . 2024-06-29 . Al Jazeera.
31. News: Kenya's president withdraws tax plan after deadly protest . 26 June 2024 . BBC News . 26 June 2024.
32. Web site: Finance Bill 2024 Withdrawn . June 28, 2024 . July 13, 2024 . ALN.