President William Ruto’s government has come under intense pressure to revise proposed taxes and levies critics say will add the burden on Kenyan households and businesses already grappling with the high cost of living and doing business.
The proposals contained in the Finance Bill, 2023 — the first to be introduced in parliament by the new Kenyan administration — include doubling the VAT on fuel from the current 8.0 per cent to 16 percent, a heavier beauty tax on items like wigs and false beards and a 3.0 per cent housing levy on workers’ gross monthly salaries.
Ruto, who is in his eighth month in office, has prioritised increased revenue collection on his agenda to make the country less reliant on external debt, stabilise an economy he says he inherited in a bad state from the previous administration of former president Uhuru Kenyatta and fund social programmes such as affordable housing.
His administration has in past also increased contributions to the state pension scheme up to tenfold as part of efforts to strengthen the country’s social security system and promote a savings culture.
Strike threat
The aggressive taxation policies are believed to have the backing of the World Bank and the IMF, which as top creditors have recently regained their clout over Kenya’s economic policies.
But there is a groundswell of opposition to the Ruto taxes and levies among workers’ unions, employers and businesses concerned about reduced disposable incomes, additional staffing costs and higher cost of doing business.
Labour unions representing civil servants such as public universities’ staff and doctors at public hospitals have threatened to call a strike to protest the implementation of the proposed housing levy.
The Federation of Kenya Employers signalled its opposition any financing model for affordable housing that would see employers match employee contributions to a National Housing Development Fund.
The employers’ lobby successfully petitioned the courts to block a 1.5 per cent housing levy proposed by the Uhuru in 2018, warning it would increase the cost of doing business and prompt job cuts. But the public disgruntlement over the Ruto taxes has added to the government’s increasing vulnerability to criticism over its perceived failure to honour election campaign promises.
Other critics cite the uncertainty of one securing a house under the State-backed scheme given the history of theft scandal and mismanagement of statutory funds.
The resurgence of the workers’ unions is likely to give the Ruto administration a new headache, having in recent months had to deal with street protests and economic shutdowns masterminded by the political opposition.
Opposition leaders called off the demonstrations organised to protest the high cost of living and demand electoral justice last month, but they have threatened to re-call their supporters back to the streets if the grievances are not satisfactorily addressed in the ongoing parliament-led bipartisan talks.
While opposition MPs have also vowed to vote against the Finance Bill 2023, they are unlikely to stop it passing due to the dominance of the ruling Kenya Kwanza coalition in the House.
As presidential candidate last year, Ruto, for instance, opposed the housing levy and higher taxes on fuel.
