This is how democracies function, Ruto says after tax concessions

President William Ruto now says the government's climb down on major tax proposals is testimony of how 'democracies work'.

The president's Kenya Kwanza administration on Tuesday scrapped a raft of tax proposals in the Finance Bill, 2024, heaving relief for Kenyans.

The government announced that it had decided to drop some of its proposed revenue raising measures including 16 per cent VAT on bread.

"We are glad we are having conversations about issues, and our institutions are working. This is how democracies function,'' Ruto said on X, formerly Twitter.

The president, who has come under pressure over his taxation regime that critics have termed as punitive, said Tuesday's meeting responded to concerns.

"We have had a robust public engagement on the proposed Finance Bill. We have adjusted the document accordingly,'' Ruto said.

The president hailed the move moments after chairing the Kenya Kwanza Parliamentary Group meeting at State House.

In a statement after the meeting, the president's United Democratic Alliance (UDA) party said Ruto was confident about the collaboration between the executive and Parliament.

"His Excellency, the President, informed the PG that the Executive and the Legislature will continue making the right decisions no matter how difficult they are,'' the statement said.

During the session, President Ruto pointed out that last year’s proposal in Finance Bill 2023 had led to tremendous progress despite critics saying they weighed down on Kenyans.

Ruto lauded MPs for taking the mandate seriously to scrutinise the legislative proposals brought to the House by the executive including the Finance Bill, 2024.

"The president also commended national institutions for working effectively in a democratic Kenya. The National Assembly has changed the Finance Bill that was prepared by the Executive. This is as it should be,'' Ruto said.

The contentious tax proposals dropped from the Finance Bill, 2024 include 16% VAT on bread, Excise duty on vegetable oil, VAT on transportation of sugar, 2.5 per cent Motor Vehicle Tax and Eco Levy on locally manufactured products.

The eTims was receded from farmers and small businesses with a turnover of below Sh1 million while Excise duty was imposed on imported table eggs, onions and potatoes to protect local farmers.

The government also dropped an increase in mobile money transfer and VAT on financial services and foreign exchange transactions.

The threshold for VAT registration has been increased from Sh5 million to Sh8 million.

This therefore means that many small businesses will no longer need to register for VAT.