Kenyan protests erupt over controversial finance bill. What is it?

Violent clashes erupted in Kenya's capital and across the country as protesters took to the streets to denounce a new finance bill that would raise taxes amid a severe cost-of-living crisis.

Several people have been killed as police used tear gas, water cannons and live ammunition to try to disperse the crowds. Protesters stormed the parliament building, setting parts of it on fire, as lawmakers debated and ultimately passed the contentious legislation.

The finance bill aims to raise an additional $2.7 billion in taxes as part of an effort to reduce Kenya's heavy debt burden, with interest payments alone consuming 37 per cent of the government's annual revenue.

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Proposed tax hikes included a 16 per cent value-added tax on basic goods like bread and cooking oil, as well as new levies on vehicle ownership.

The proposed Finance Bill for the 2024/25 fiscal year has some of the key tax measures including a new 2.5 per cent tax on the value of motor vehicles to be paid annually, an "eco levy" on most manufactured goods including sanitary products and increases to existing taxes on financial transactions like mobile money transfers.

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Protesters, many of whom are also calling for President William Ruto to step down, argued that the tax increases will further squeeze Kenyans who are already struggling with soaring inflation, drought, and other economic shocks.

"We want to shut down parliament and every MP should go down and resign," protester Davis Tafari told Reuters. "We will have a new government."

Protestors say concessions not enough

In a concession to the public outcry, the government had scrapped some of the most unpopular tax proposals, including the bread and cooking oil VAT.

However, this has done little to quell the widespread anger, with demonstrators demanding a complete withdrawal of the finance bill.

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The unrest highlighted the difficult balancing act facing Ruto's administration, which must appease international lenders, like International Monetary Fund (IMF) pushing for fiscal consolidation while also addressing the needs of its impoverished citizens.

(With inputs from agencies)