KBA Calls for PAYE and Income Taxes Relief, Stability Ahead of 2027 Elections

KBA Calls for PAYE and Income Taxes Relief, Stability Ahead of 2027 Elections

The Kenya Bankers Association (KBA) has sounded the alarm over the government’s planned overhaul of Pay‑As‑You‑Earn (PAYE) tax bands, warning that declining real wages could undermine economic stability, business confidence, and public trust ahead of the 2027 General Elections.

Speaking during the National Development Implementation Committee (NDIC) meeting in Nairobi, KBA Chief Executive Officer Raimond Molenje emphasized the urgency of stabilizing the economy before the polls.

“With about 20 months to the General Elections, we need stability before and after the polls, and central to this is restoring the lost purchasing power for Kenyans and businesses,” Molenje said.

Proposed Tax Reforms

The bankers have proposed scrapping the top two PAYE bands of 32.5 and 35 per cent, which they argue are punitive and discourage investment. Instead, they recommend reducing the lowest band from 10 to 5 per cent, reinstating the 20 per cent band, and expanding the 25 per cent band.

According to KBA, these changes would leave households with more disposable income, spur consumer spending, and inject fresh momentum into Kenya’s economy.

“This pledge is not just about easing the tax burden. It is about creating fairer middle bands, boosting household purchasing power, and promoting economic vibrancy,” the association noted in its statement.

The reforms, they argue, would benefit both high‑ and low‑income earners, while ensuring businesses thrive and sustainable growth is achieved across sectors.

Warning Against Instability

KBA cautioned that failure to address declining real wages could trigger political and economic instability at a time when Kenya is struggling to turn around its economy.

“If real wages continue to decline, we risk disrupting business operations, eroding public confidence in government, and undermining fiscal consolidation efforts,” the bankers warned.

They further urged the government to align the top PAYE rate with the corporate tax rate, arguing that such a move would promote fairness and encourage investment.

Government’s Previous Efforts

The government has previously committed to making adjustments to PAYE computations. In April, the Cabinet directed employers to automatically apply all eligible tax reliefs and exemptions when calculating PAYE taxes for employees.

In July, the Kenya Revenue Authority (KRA) introduced a new system integrating PAYE filing with the Government Human Resource Information System (GHRIS), IFMIS, and the Central Bank of Kenya (CBK) through API connections. The system enables seamless payment and filing of PAYE, the Affordable Housing Levy, NITA Levy, and other labour‑related contributions.

Despite these reforms, KBA insists that more needs to be done to cushion households and businesses from the rising cost of living and declining purchasing power.

Looking Ahead

With the 2027 elections looming, analysts say the debate over PAYE reforms could become a central issue in Kenya’s economic and political discourse. The banking sector’s call for relief underscores growing concerns that heavy taxation could stifle growth and fuel discontent among voters.

As Molenje put it:

“We must restore confidence in our economy. Tax reforms are not just numbers on paper; they are about the livelihoods of millions of Kenyans and the stability of our nation.”

The ball is now in the government’s court to decide whether to heed the bankers’ call and implement reforms that could reshape Kenya’s fiscal landscape ahead of the polls.

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KBA Calls for PAYE and Income Taxes Relief, Stability Ahead of 2027 Elections