Kenyans may soon see higher prices for essential items like diapers and sanitary towels, following the government's plan to reclassify them from zero-rated to exempt status under the Eco Levy.

"The above measure will increase the cost of supplies since the exemption does not provide relief for input VAT incurred, and the cost will be passed on to final consumers," read the proposal initially put forth by former Cabinet Secretary for the National Treasury, Njuguna Ndung’u, in June. However, President William Ruto paused this move after widespread protests against the Finance Bill 2024.

Exempt status items don’t carry the standard 16 percent VAT, but manufacturers cannot reclaim the VAT on materials used in production. As a result, they often pass these extra costs on to consumers, increasing prices for products like diapers and sanitary towels, which are already costly for many Kenyans.

Originally, the Finance Bill aimed to impose the Eco Levy on goods with a significant environmental impact, but Ruto’s intervention suspended it. The Bill suggested that only exported goods and services should remain zero-rated.

The reclassification from zero-rated to exempt was part of a government strategy to reduce lost revenue from tax concessions and preferences. Other items shifted to exempt status included inputs and raw materials for agricultural pest control products, fertilizers, and pesticides—changes likely to raise prices across these sectors.

Following public backlash, President Ruto met with Parliament in July to pull back the Finance Bill. Still, similar proposals have re-emerged, leading many Kenyans to worry about a stealthy return of the initial bill.

"The public consultation exercise was not in vain," noted National Assembly Finance Committee Chair Kuria Kimani after a June Parliamentary group meeting. Yet, the reappearance of similar tax adjustments suggests that the Finance Bill’s more controversial aspects might be returning under different guises.