What next for tax plan after Ruto's rejection?

Anti-riot police on guard outside Parliament on June 18, 2024. [Boniface Okendo, Standard]

The controversial Finance Bill 2024 is now back in the hands of the National Assembly Finance Committee for reconsideration and subsequent repeal following weeks of protests.

This is after President William Ruto declined to sign it on Wednesday in the wake of deadly anti-tax protests that have morphed into calls for radical reforms in his administration.

The Bill sought to raise Sh300 billion in additional taxes to plug the budget deficit and reduce borrowing.

To achieve this, his administration sought to introduce new levies on basic commodities such as bread, vegetable oil and sugar and a new motor vehicle circulation tax.

An "eco levy" had also been slapped on many goods such as sanitary pads and diapers but this was later amended to exempt the pads and diapers. The tax was, however, retained on imported goods -- a move that Ruto's loyalists said would spur local production.

The Bill had also proposed an increase in mobile money financial transactions. Kenyans said the measures would increase the cost of living.

Ruto's decision not to sign the Bill sparked debate on whether he, constitutionally, can withdraw a bill and what would be the next course of action given that the National Assembly is on recess until July 23.

So what next for the Finance Bill?

According to Article 115 of the Constitution, the President has to, within 14 days, decide on whether to sign a Bill into law or refer it back to Parliament with amendments. Should the 14 days pass without the President taking action on the Bill, then it automatically becomes law.

“Within fourteen days after receipt of a Bill, the President shall assent to the Bill or refer the Bill back to Parliament for reconsideration by Parliament, noting any reservations that the President has concerning the Bill,” the Constitution says.

In this case, Ruto has already written a memorandum to the National Assembly indicating his resolve to have the Bill rejected in its entirety. This has been confirmed by National Assembly Speaker Moses Wetang'ula. This now means it cannot automatically become law.

The next step is for the Bill to be referred to the committee of Finance which will then take the President’s proposals into consideration. The Kimani Kuria-led committee is now expected to consider the Bill and present a report before the House. The House will then have 21 days to consider the report.

On June 28, Wetang'ula explained that in the event the committee fails to report to the House at its next sitting, the House shall proceed and consider the memorandum at a committee of the whole House upon resumption from recess.

Questions as to why the House will not be convening a special sitting to consider the President’s memorandum on the Finance Bill have emerged with some accusing MPs of foul play.

Wetang'ula clarified that it was in accordance with Standing Order 42(3) of the National Assembly, which requires the Speaker to transmit to every member any message received from the President at a time when the House is not in session and to report the message on the day it next sits.

The Speaker said the committee and the House, in their consideration of the President's memorandum, will be guided by the need to reflect the voice of the people of Kenya who have rejected the Bill.

“The President's memorandum constitutes a rejection of the Bill in entirety. The effect is that the entire Bill will be lost upon approval of the President's reservations and recommendations by the National Assembly. Any member intending to negate the President’s reservations or revive any of the sixty-nine clauses in the Bill is required to marshal the votes of at least two-thirds of the members being 233 members. This is in keeping with provisions of 115 of the Constitution,” noted Wetang'ula.

In the event that Parliament, after considering the President’s reservations, passes the Bill a second time, without amendments, or with amendments that do not fully accommodate the President’s reservations, the Speaker shall within seven days re-submit it to the President, and the President shall within seven days assent to the Bill.

However, in the event that the House approves to reject the Bill in its entirety, the Finance Bill 2023 will apply for the next Financial year.

This will lead to a financing gap of Sh300 billion between the expenditure approved by the National Assembly through the Appropriations Bill, 2024 and the projected revenues that may be raised from existing tax measures.

To address this, Wetang'ula noted, the House will enact a supplementary Appropriations Bill to reduce government expenditure.