KBA Pressures Ruto to Slash PAYE Across All Income Brackets
The Kenya Bankers Association (KBA) has stepped up pressure on the government to implement broad-based cuts to Pay As You Earn (PAYE) tax across all income brackets, arguing that deeper relief for workers is necessary to revive household spending, support businesses, and stimulate economic growth.
In a policy statement released on Wednesday, February 4, the banking industry lobby proposed a uniform five per cent reduction in PAYE rates across all existing tax bands. KBA said the move would ease pressure on workers’ disposable incomes at a time when rising statutory deductions and the high cost of living continue to strain households.
“Kenya’s tax system remains heavily dependent on labour income, and the cumulative burden of PAYE, increased NSSF contributions, and other statutory deductions is placing significant pressure on both employees and employers,” the association said in its statement.
The bankers welcomed President William Ruto’s recent announcement that the government plans to zero-rate PAYE for workers earning up to KSh30,000 per month, describing it as a timely intervention for low-income earners. However, they cautioned that the relief, while welcome, may not be sufficient to restore consumer confidence and domestic demand.
“While the proposed exemption for low-income earners is commendable, the erosion of disposable income across the middle and higher income brackets continues to weaken consumption and slow economic activity,” KBA noted.
The association argued that broader PAYE cuts would boost purchasing power, encourage spending, and ultimately strengthen government revenues through increased economic activity and indirect taxes such as Value Added Tax (VAT) and excise duty.
KBA further recommended that the highest PAYE rate be capped at 30 per cent, in line with the National Tax Policy approved in 2023. The policy states that personal income tax rates should not exceed the corporate tax rate, a principle the bankers say is critical to maintaining fairness and competitiveness in the tax system.
The renewed push by the banking sector comes barely a day after President Ruto announced that the government will table a Tax Amendment Bill in Parliament to reduce PAYE from 30 per cent to 25 per cent for Kenyans earning up to KSh50,000 per month. Under the proposed changes, workers earning below KSh30,000 would be fully exempt from PAYE, while those earning between KSh30,000 and KSh50,000 would benefit from a reduced rate.
Speaking during the announcement, the President said the measures are intended to ease the cost-of-living burden on workers and support economic recovery.
“Our goal is to improve take-home pay for working Kenyans, stimulate consumption, and support job creation as the economy recovers,” Ruto said.
KBA, however, maintained that a more comprehensive approach is needed. The association argued that higher take-home pay would not only lift household consumption but also improve borrowers’ ability to service loans, reduce default risks, and expand access to credit for households and Micro, Small, and Medium Enterprises (MSMEs).
“Increased disposable income strengthens repayment capacity, enhances financial inclusion, and supports private sector credit growth,” the bankers said.
The association also warned that without broader tax relief, businesses could face weaker demand, particularly as the country approaches an election cycle that traditionally slows investment and consumption. According to KBA, a uniform PAYE reduction would help cushion businesses, stimulate productive sectors such as manufacturing and agriculture, and support the government’s ambition of achieving double-digit private sector credit growth.
As Parliament prepares to debate the proposed Tax Amendment Bill, the banking sector’s recommendations are likely to intensify discussions on how best to balance revenue collection with economic growth and household welfare. The outcome of the debate could shape Kenya’s tax policy direction at a time when both workers and businesses are calling for relief.
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KBA Pressures Ruto to Slash PAYE Across All Income Brackets
