Kenya's government on Tuesday scrapped plans to impose multiple tax hikes, the presidency said, amending a controversial bill that sparked protests where hundreds of demonstrators were arrested.

The East African economic powerhouse has struggled with a cost-of-living crisis, which critics warned would only worsen under the levies laid out in a bill due to be debated this week and passed before June 30.

Hundreds of mostly young protesters assembled near parliament on Tuesday, with police firing tear gas, according to AFP journalists. The human rights commission KNHCR said 335 arrests were made.

Hours later, the presidency announced that it would scrap many of the bill's most contentious provisions, including taxes on bread purchases and car ownership.

"The Finance Bill has been amended to remove the proposed 16 per cent VAT on bread, transportation of sugar, financial services, foreign exchange transactions as well as the 2.5 per cent Motor Vehicle Tax," the presidency said in a statement.

"Additionally, there will be no increase in mobile money transfer fees, and Excise Duty on vegetable oil has also been removed," it added.

The cash-strapped government had earlier defended the hikes -- which were projected to raise some 346.7 billion shillings ($2.7 billion), equivalent to 1.9 percent of GDP -- as a necessary measure to cut reliance on external borrowing.

Lawmakers were due to debate the bill on Tuesday afternoon but postponed the discussion to Wednesday, just before the presidency announced the changes following recommendations made by a parliamentary committee.

"Because the people's representatives have listened to the people... they have adjusted the proposals," President William Ruto told lawmakers.

- 'Fighting for my future' -

The bill sparked fury among many Kenyans, who staged protests on Tuesday dubbed "Occupy Parliament".

Black-clad protesters were forced into a cat-and-mouse situation with police, with officers lobbing tear gas and -- in one instance -- chasing people into a church.

KNHCR said there were "arbitrary arrests" and an "unnecessary and disproportionate" use of force by security forces.

A police report seen by AFP said one officer was seriously hurt when a tear gas grenade exploded in his hands.

"I am fighting for my future," one protester, 23-year-old Wangari, told AFP.

"With such taxes, with such exploitation, I don't see how we can build a life," she said.

"This is making it very hard for us, especially us, that are not a part of the one percent."

Her thoughts were echoed by others like 29-year-old Rara Eisa who was protesting for the first time.

"I am tired. The prices of everything have gone up, life is no longer affordable," she said, adding that the taxes "are not lenient in any way".

Many demonstrators waved signs emblazoned: "Do not force the taxes on us", referring to Ruto as Zakayo, the Swahili name for the biblical tax collector Zacchaeus.

"This finance bill must be revised to reflect what the 'mwananchi' (ordinary citizen) wants and can do," demonstrator Yvonne Muthoni told AFP after the withdrawal of the measures was announced.

"The government is here to serve Kenyans and freedom... better economic outcomes must be accessed by all Kenyans, not just the privileged few."

- Discontent -

Ruto came to power in 2022 on a promise to revive the economy and put money in the pockets of the downtrodden, but his policies have sparked widespread discontent.

He has raised income tax and health insurance contributions and doubled VAT on petroleum products to 16 percent.

While Kenya is among the most dynamic economies in East Africa, roughly a third of the 51.5 million population lives in poverty.

Overall inflation has remained stubbornly high at an annual rate of 5.1 percent in May, while food and fuel inflation stood at 6.2 percent and 7.8 percent respectively, according to central bank data.

The World Bank said this month that while Kenya's real GDP growth had accelerated last year to 5.6 percent from 4.9 percent in 2022, it was expected to slow to five percent this year.

© Agence France-Presse