NAIROBI, Kenya, Feb 18 – Salaried Kenyans could collectively save about Sh28 billion if the government implements a 5 percent reduction in Pay As You Earn (PAYE) taxes across all income brackets, the Kenya Bankers Association (KBA) has said, as it renewed calls for broader tax relief.
The lobby group said the proposed tax cut would put more cash into workers’ pockets at a time when high cost‑of‑living pressures and rising statutory deductions have squeezed disposable incomes.
“A 5% reduction across all PAYE tax brackets is a powerful economic stimulus. It puts money directly into workers’ hands, where it circulates quickly and drives broad‑based economic growth,” said Raimond Molenje, CEO of KBA.
Bankers argue that the estimated Sh28 billion in savings would not only increase household spending but also spur demand in key sectors such as manufacturing and agriculture, supporting broader economic activity.
“A 5% PAYE reduction would return approximately Sh28 billion to salaried workers. Through strong consumption effects, this would translate into about Sh42 billion in additional GDP output.”
The call for uniform tax relief comes as the government signals moves to ease the tax burden on lower‑paid workers.
President William Ruto and Treasury Cabinet Secretary John Mbadi have proposed exempting employees earning below Sh30,000 per month from PAYE and reducing the rate for those earning up to Sh50,000, changes expected to be tabled in Parliament as part of the Finance Bill 2026.
While KBA welcomed the targeted relief for low‑income earners, it said that extending cuts across all income bands would help counter the cumulative impact of deductions such as the National Social Security Fund (NSSF) and other levies that reduce take‑home pay.
Broader PAYE cuts would need to be balanced with government revenue requirements to ensure funding for public services remains intact.
KBA, however, says higher disposable incomes would drive stronger household spending, potentially offsetting revenue losses through increased economic activity and improved tax compliance in other areas.
With the Finance Bill 2026 set for parliamentary debate, the banking sector’s recommendations are expected to play a prominent role in fiscal policy discussions, as lawmakers weigh the balance between tax relief and revenue need
