The banking sector has urged the government to implement a five per cent reduction in PAYE taxes for all income levels, arguing that a broader relief would strengthen household spending, support businesses, and boost economic growth.
The Kenya Bankers Association said it welcomes President William Ruto’s plan to remove taxes for low-income earners, but emphasized that extending relief across all tax bands would better increase disposable income and stimulate key areas such as agriculture and manufacturing.
“We welcome the Government’s proposal to zero-rate PAYE for workers earning up to Sh30,000 per month, as it provides timely relief in response to rising cost-of-living pressures facing Kenyan households and businesses,” the association said on Wednesday.
KBA highlighted that the move would help offset the impact of increasing National Social Security Fund contributions, which will require both employers and employees to contribute up to six per cent of salaries by February 2027.
“The cumulative effect of the deductions presents a significant burden for workers and employers without pension schemes, highlighting the need for complementary tax relief measures through PAYE for all workers,” the statement added.
The bankers recommended capping the highest PAYE rate at 30 per cent, in line with the 2023 National Tax Policy, while proposing a uniform five per cent reduction across all brackets. According to KBA, this would expand take-home pay, boost household consumption, and strengthen sectors that rely on domestic demand.
“Easing the tax burden on workers will support job creation, particularly in sectors where employment growth is closely linked to domestic demand and labour affordability,” the association said.
The KBA added that higher incomes would also improve repayment capacity for borrowers and widen access to credit for households and micro, small, and medium enterprises, supporting entrepreneurship and initiatives such as the NYOTA programme.
According to the association, this tax relief could stimulate both formal and informal sectors, revive economic growth, and reduce the slowdowns that often precede general elections.
“The banking industry remains committed to supporting individuals and businesses and to driving double-digit private sector credit growth in 2026 and beyond, contributing to a more vibrant, inclusive, and resilient economy,” the statement said.
The recommendations follow President Ruto’s announcement to exempt low-paid workers and reduce taxes for those earning up to Sh50,000. At the UDA Aspirants’ Forum at State House in Nairobi, he said the proposals would be presented to Parliament once it resumes.
“When Parliament resumes next week, we will present a proposal that every Kenyan earning less than Sh30,000 will not pay any taxes because we have steadied the economy,” the President said.
“Any Kenyan who earns up to Sh50,000, we are reducing their taxes from 30 per cent to 25 per cent. 1.5 million Kenyans will not pay any taxes, and another 500,000 Kenyans will have their taxes reduced.”
President Ruto added that stabilizing the economy first was key to making the initiative possible.
“That is how we are going to manage the cost of living. When we said bottom up, it was not a slogan, it was because we want to mind the people at the bottom of the pyramid,” he said.
Treasury Cabinet Secretary John Mbadi said the Ministry will present the Tax Laws Amendment Bill for approval before the 2026 Finance Bill is published. Speaking at the People’s Dialogue Forum in Meru, he confirmed that the President had directed him to urgently submit the proposal once Parliament resumes.
“Let me announce this here. We have agreed with President Ruto that low-income earners in this country should be given a reprieve,” Mbadi said.
Government statistics show that about 3,650,165 Kenyans are salaried, with 1.5 million earning Sh30,000 or below. If approved, these workers would be exempt from income tax, while another 500,000 would benefit from lower rates, offering relief to households and supporting growth across the formal and informal economy.
