Controversial but watered-down finance bill that many fear will up cost of living is due to be debated in parliament.

Police in Kenya have fired tear gas and used water cannon to disperse protesters gathering near parliament in the capital to demonstrate against planned tax hikes that many fear will worsen the cost-of-living crisis.

Tense scenes played out in Nairobi on Thursday as hundreds took to the streets in opposition to a finance bill, which proposes introducing new taxes and levies that would increase the price of basic goods.

The tax increases were projected to raise 346.7 billion shillings ($2.7bn), equivalent to 1.9 percent of gross domestic product (GDP), and reduce the budget deficit from 5.7 percent to 3.3 percent of GDP.

The cash-strapped government of President William Ruto agreed to make concessions on Tuesday, watering down the bill after hundreds of mostly young protesters clashed with police.

But the government will still go ahead with some tax increases and has defended the proposed hikes as necessary for filling its coffers and cutting reliance on external borrowing.

Protesters have decided to stage demonstrations across the country, including in the Indian Ocean city of Mombasa and the lakeside city of Kisumu, both opposition bastions.

In Nairobi, lawmakers were debating the bill on Thursday in its second reading before parliament. The final version must pass before June 30. Meanwhile, authorities blocked several roads near parliament and made a heavy police deployment.

Reporting from Nairobi’s city centre, Al Jazeera’s Malcolm Webb said demonstrators outnumbered the police in the streets.

“Police are firing a lot of tear gas here this morning … and there is a thick smell of tear gas in the air where we are,” he said. Around him, some people chanted: “Ruto must go!”

“A lot of protesters here are young people, social media users. It looks very different from the kinds of protests that we saw in Kenya just over a year ago called for by the political opposition also about the rising cost of living,” Webb said. “The cost of living has been going up, on and off, since the global [COVID-19] pandemic.”

Protestors react during a demonstration against Kenya's proposed finance bill
Tensions were high in the Kenyan capital as hundreds took to the streets in opposition to a finance bill, in Nairobi, Kenya, on June 20, 2024 [Monicah Mwangi/Reuters]

‘Targeting the poor’

Kenyans are “fed up of the increased taxation”, Stella Agara, a Kenyan tax justice activist, told Al Jazeera, adding it “especially increased austerity measures that keep on targeting the poorest of citizens and is becoming very uncomfortable for most of them”.

“But there is now a very interesting group that has been brought to the fore, which is Generation Z … They have been extremely disinterested in the elections, in voting, etc. But for some reason, this time they are very keen and are the ones on the streets protesting increased taxation – especially because of some of the taxes that are going to be imposed on digital content creation, which is a space that they dominate.”

Agara said younger Kenyans have also seen their parents’ financial struggles under “a government that is completely insensitive to their needs”, which is also causing them to react this way.

The presidency announced on Tuesday the removal of proposed levies on bread purchases, car ownership as well as financial and mobile services, prompting a warning from the treasury of a 200-billion-shilling ($1.5bn) shortfall as a result of the budget cuts.

The government has now decided to increase fuel prices and export taxes to fill the void left by the changes, a move critics say will make life more expensive in a country already battling high inflation.

The East African economic powerhouse relies heavily on diesel for transport, power generation and agriculture, while kerosene is used by many households for cooking and lighting.

Tuesday’s protest was largely peaceful, although police also fired volleys of tear gas. At least 335 people were arrested, according to a consortium of lobby groups, including the human rights commission KNCHR and Amnesty Kenya.

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