President William Ruto last night moved to avoid a legal minefield after presenting a memorandum to Parliament formally withdrawing the controversial Finance Bill, 2024 without which it would still have become law after 14 days.
“I decline to assent to the Finance Bill 2024, and refer the Bill for reconsideration by the National Assembly with the recommendation for the deletion of all the clauses thereof,” the President said in the memo, notifying Parliament about his reservations about the proposed revenue-raising law.
Failure to refer the Bill, through which the government had hoped to raise an additional Sh347 billion in tax revenues, back to the National Assembly would have automatically turned it into law on July 15.
This could have rendered the withdrawal of the planned tax hikes without the accompanying notice null and void.
“Within fourteen days after receipt of a Bill, the President shall either assent to the Bill or refer the Bill back to Parliament for reconsideration by Parliament noting reservations that the President has concerning in the Bill,” says Chapter 8 of the Constitution.
“If the President does not assent to the Bill or refer it back within the period prescribed, or assent to it, the Bill shall be taken to have been assented to on the expiry of that period.”
The Appropriations Act, which contains the government spending plans in a fiscal year, will be subjected to a similar process, with the President recommending expenditure cuts to create a leaner budget.
It was also approved in the National Assembly on Tuesday.
Dr Ruto earlier announced he would not sign the Bill, which proposes some tax increases, a day after violent clashes between the police and protesters nationwide left at least 15 people dead and scores wounded.
He said he would now start a dialogue with Kenyan youth, without going into details, and work on austerity measures - beginning with cuts to the budget of the presidency - to make up the difference in the country's finances.
Deputy President Rigathi Gachagua also asked young people to call off the protests to avoid any further loss of life and destruction of property and blamed the intelligence services for allegedly not giving the President proper advice.
But some demonstrators said on social media that despite Dr Ruto's climbdown they would go ahead with a rally planned for Thursday.
The President’s memo shifts the focus back to MPs who could also do the unthinkable and reject the President’s withdrawal of the Finance Bill if backed by 233 of them or two-thirds of the National Assembly.
Lawmakers had already removed some tax hikes from the final version of the Finance Bill on Tuesday, including on bread, cars and cooking oil, but inserted others in an effort to avoid a budget gap.
The withdrawal of the tax hikes marks a major victory for the youth-led protest movement that grew from online condemnations of tax rises into mass rallies demanding a political overhaul, in the most serious crisis of Ruto's two-year-old presidency.
The Treasury had warned of a Sh200 billion shortfall in revenues in the eventuality of the Finance Bill's rejection in totality.
It lined up cuts affecting critical spending including school feeding, the payment of pending bills, the hiring of medical interns and the confirmation of trainee teachers into permanent and pensionable terms and the hiring of teachers in Junior Secondary.
Treasury Cabinet secretary Njuguna Ndung’u had advised MPs to approve the measures contained in the 2024 Finance Bill, 2024 as proposed by the exchequer or risk the budget hole that would have included the loss of Sh5 billion to the Counties equitable share of revenue.
President Ruto on Thursday called for fresh expenditure cuts to cover occurring shortfalls in revenues, including allocations to his office and the Executive. “I direct immediate further austerity measures to reduce expenditure, starting with the Executive Office of the President and extending to the entire executive arm of government. I direct that operational expenditure in the Presidency be reduced to remove allocations for the confidential vote, reduce travel budget, hospitality and purchase of motor vehicles, renovations and other expenditures,” he said.
He also proposed that Parliament, the Judiciary and county governments work with the Treasury to undertake the budget cuts.
The government will continue raising revenues from existing tax laws.
