Employers Push for Tax Reduction for Employees as Finance Bill 2026 Proposes New Taxes

Employers Push for Tax Reduction for Employees as Finance Bill 2026 Proposes New Taxes

Fresh pressure is mounting on the government over the proposed Finance Bill 2026 after the Federation of Kenya Employers (FKE) warned that new tax measures could further strain workers and businesses already grappling with the high cost of living.

Speaking during a press briefing on Thursday, May 21, FKE Chief Executive Officer Jacqueline Mugo said Kenyan employees are currently burdened by multiple statutory deductions that continue to shrink disposable income and reduce purchasing power across the country.

The employers’ lobby announced that it would formally submit its objections to Parliament’s Finance Committee on May 25, arguing that the proposed tax changes could weaken economic growth and increase financial pressure on both employers and employees.

“We are calling on the government to see what can be done to alleviate the high level of statutory deductions on employees’ payrolls because that will also put pressure on businesses,” Mugo stated during the briefing.

Her remarks come amid growing national debate over the Finance Bill 2026, which contains a raft of tax proposals aimed at increasing government revenue collection ahead of the 2026/2027 financial year.

According to FKE, the current taxation environment has already left many workers struggling to meet basic household needs, while companies continue to face rising operational expenses, increased utility costs, and declining consumer spending.

The organisation warned that introducing additional taxes at a time when inflationary pressures remain high could slow economic activity and reduce productivity in several sectors of the economy.

Business leaders have particularly raised concerns over the cumulative effect of deductions such as Pay As You Earn (PAYE), the Housing Levy, Social Health Insurance Fund (SHIF) contributions, and pension deductions, arguing that workers are taking home significantly less despite stagnant wages.

FKE also strongly opposed proposals in the bill seeking to grant the Kenya Revenue Authority broader powers to access personal and business data for tax compliance purposes.

According to the employers’ body, the move could expose sensitive personal information and potentially violate constitutional rights relating to privacy and data protection.

“In regard to KRA, we want a situation where there is no increase in taxation and access to people’s data and related issues,” Mugo added.

The Finance Bill proposes expanded access to financial and digital records as part of efforts by the tax authority to seal loopholes, widen the tax base, and curb tax evasion.

Government officials have defended the proposals, arguing that enhanced access to data would improve compliance and help reduce revenue losses caused by underreporting and undeclared business transactions.

However, critics say the proposals risk creating an environment of excessive surveillance and could undermine public trust in government institutions.

The debate over taxation has intensified in recent months as Kenyans continue to face rising fuel prices, increased transport costs, and higher prices of essential commodities.

The employers’ concerns also emerge months after Treasury Cabinet Secretary John Mbadi hinted at possible tax relief for low-income earners.

Speaking during a Finance Bill 2026 briefing earlier this month, Mbadi said the government was still considering increasing the tax-free income threshold from Ksh24,000 to Ksh30,000 per month, despite the proposal not appearing in the current draft bill.

“Before the public participation process ends, we will make a decision. Before June 30 and before the Finance Bill is passed, the government is likely to propose amendments to align PAYE with our earlier proposal to increase the tax-free income threshold from Ksh24,000 to Ksh30,000 per month,” Mbadi stated at the time.

The National Assembly Finance Committee is expected to begin receiving views from stakeholders, businesses, and members of the public before making recommendations on the final version of the bill.

With opposition from employers, labour groups, and sections of the public continuing to grow, the Finance Bill 2026 is shaping up to become one of the most closely watched economic debates in the country ahead of the next financial year.

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Employers Push for Tax Reduction for Employees as Finance Bill 2026 Proposes New Taxes