Each year, the Kenyan government tables a finance bill outlining measures for funding the national budget. In the past, these bills have scarcely attracted public attention. This changed dramatically in 2023, with President William Ruto’s first budget following his election victory the year before. Ruto inherited an economy battling high food and fuel prices in addition to a heavy debt burden. His budget policy response, however, added to the crisis by doubling the tax on fuel, increasing income taxes and introducing a levy to fund his pet project of affordable housing. He justified higher taxes as a necessity imposed by high debt repayment costs. Even though there was clear public outrage with the Finance Bill 2023, government-allied legislators used their majority in parliament to pass the bill with little debate. The new taxes set off the first popular tax protests mobilised by opposition parties. The demonstrations fizzled out but public debate continued with regular fuel price increases and more new levies proposed.

The Finance Bill 2024 prescribed yet more tax pain to fund the KShs 3.9 trillion (US$30.5 billion) budget for 2024/25. Social media posts were quick to point out that a sizeable chunk of tax revenue was carved out for the luxury and comfort of a few government elites. The tabling of the Finance Bill 2024 in parliament sparked one of the broadest protest actions in Kenya’s history. President Ruto was forced to withdraw the bill, raising new questions as to how the budget would be funded and what compromises would be made. The 2024 tax protests coincided with the conclusion of our research into the 2023 protests and the aftermath. Our ethnographic fieldwork, interviews and focus group discussions give us a way to see the context of this second wave of Kenyan tax protests. At the core of these protests is the idea of a fiscal social contract, that is, a “deal” in which citizens willingly pay taxes in return for government using these resources to provide services such as education and health. In Kenya that contract has been breaking down gradually and culminated in the storming of the parliament and the killing of protesters. The gap between government and citizens has been widened too by external actors, particularly the International Monetary Fund, who have been unwilling to renegotiate or even cancel the debt as demanded by some economists.

Finance Bill 2023

The most controversial of tax measures in 2023 were a mandatory housing levy and an 8% increase in value-added tax on fuel. The first appeared to many as yet another slush fund for corrupt politicians. The tax on fuel was expected to raise the price of commodities, thus increasing the costs of living for households with already meagre incomes. The Kenya Revenue Authority then hired 1,400 assistants to enforce tax compliance. They aimed at small and medium enterprises, many of which operate informally and are therefore “invisible” to the tax authorities. The revenue authority also introduced a system for businesses to generate and transmit electronic tax invoices. Previously, businesses would self-declare their monthly sales and purchases, which would allow some degree of misreporting. The new system aimed to plug any tax revenue leakages. Our study examined ordinary Kenyans’ understanding of taxes and how they position taxes among other obligatory payments, such as money requested by family members, tithes, or bribes. We found that many likened taxes to bribes due to their obligatory and coercive nature. We also looked at how these understandings changed shortly after the enactment of the unpopular Finance Act 2023. We learned that some Kenyans had begun to find ways to avoid paying taxes, giving the high cost of living and waning public confidence in the political leadership as their reasons for doing so.

Their workarounds included ditching mobile money payments and filing nil returns – claiming to have no taxable income. Some employers, on the other hand, kept two payrolls, official and unofficial, to reduce their tax burden. Such forms of “fiscal disobedience” laid the groundwork for the 2024 protests.

Finance Bill 2024

The 2024 finance bill contained some harsh tax proposals. Perhaps the most contentious was a 2.5% motor vehicle circulation tax, which implied that motorists generated income simply by being on the road.

Other controversial provisions included:

• a proposal to raise excise taxes on internet data and money transfers via telcos (M-Pesa and others) and banks from 15% to 20%
• a 25% excise duty on edible (cooking) oils
• a 16% value-added tax on bread, financial services and foreign exchange transactions.

Among the controversial allocations in the budget were billions of shillings for foreign travel, the president’s advisors, confidential expenditure, renovations of the president’s offices and the deputy president’s residence, as well as motor vehicles. There were also separate allocations to the offices of the spouses of the president and deputy president. For many Kenyans, this was “budgeted corruption” and at odds with Ruto’s mantra of “living within our means”.

Kenyan taxpayers were also angered by corruption scandals and the public display of wealth by some politicians and public officers. The bill also proposed extending the electronic tax invoice management system to farmers and small traders. Different stakeholders came out strongly to dissuade government from pushing forward with the bill, noting the possible effects on local manufacturing, employment and the cost of living.

Making public participation work

The big question is how Kenya can renew the fiscal social contract and at the same time expand its democracy to allow greater public involvement in the tax policy decision-making. Kenyans used to silently agree on most taxation laws in the past. Those times are over. Ruto’s attempts to bring the youth into a dialogue on the way forward have so far failed on account of lost trust. There might be an opportunity to retrace the path back to Kenya’s constitution, which seeks to damp down the excesses of government and protect taxpayers through public participation. The results of our 2023 study, however, indicate that public participation tends to be a tick-box exercise just for show and to satisfy a legal requirement. We would like to highlight, instead, the need for a public participation law which sets out exactly what is expected from it and how to achieve it. It must be accompanied by goodwill and prudence on the part of government, monitored by vigilant taxpayers.

Eric Magale is a Postdoctoral Research Fellow in the Department of Anthropology, Archaeology and Development Studies at the University of Pretoria.

This article appeared on The Conversation on 16 July 2024.