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Bank Strike Ends in Kenya

March 5, 1998

NAIROBI, Kenya (AP) _ Kenyan bank employees returned to work Thursday after the government, faced with the threat of a general strike, rescinded a tax hike on subsidized loans employees receive from their employers.

On the same day, the Finance Ministry announced sweeping tax measures aimed at raising revenue to plug the widening budget deficit. The increases will affect consumer prices, including gasoline and diesel and revokes tax deductability on gifts to charities and not-for-profit organizations.

There is a rising chorus of complaints from Kenyans that the high taxes they already pay go into the pockets of government officials or ill-conceived projects and not into providing essential services and repairing crumbling infrastructure.

The bank employees walked off the job Friday. By Tuesday, most of the banking business in the east African nation had come to a standstill. On Wednesday, union leaders threatened a general strike unless the government withdrew the 7 percent increase in taxes employees have to pay on their preferential loans.

Wednesday night, Finance Minister Simeon Nyachae said he had suspended implementation of the increase and had sent the matter back to parliament for review. Parliament, which is on recess, is expected to resume later this month.

The increase, encouraged by the International Monetary Fund as part of Kenya’s compliance with a structural adjustment program, was contained in the 1996 Income Tax Act.

The Central Organization of Trade Unions called off the bank strike Thursday as well as a public rally planned to discuss organization of a general strike.

COTU Secretary General Joseph Mugalla, a member of parliament from President Daniel arap Moi’s Kenya African National Union, said the unions hope the promised parliamentary review would scrap the tax that ``has put a heavy burden on the workers.″

Employers were ordered to implement the tax increase in January. Bank workers gave them a month to withdraw the tax or face a strike.

Banks and other firms in Kenya offer employees loans at interest rates as low as 3 percent. The market rate is between 30 percent and 35 percent.

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