The Central Organisation of Trade Unions Kenya (COTU-K) has called on Parliament to revise Pay As You Earn (PAYE) tax bands for employees earning up to KSh60,000 per month, arguing that the Finance Bill 2026 does little to ease the financial pressure facing Kenyan workers.
In submissions presented before the National Assembly’s Finance and National Planning Committee, the labour federation said rising inflation, increased fuel and food prices, transport costs and growing statutory deductions have significantly reduced workers’ purchasing power.
COTU seeks tax relief for workers
COTU is now pushing for an upward review of the tax-free income threshold, lower payroll taxes for low- and middle-income earners and annual inflation-based adjustments to PAYE bands.
According to the union, the reforms would help shield workers from “bracket creep,” where inflation pushes employees into higher tax brackets despite their real incomes remaining unchanged.
“According to COTU research by the Economic and Education Department, the proposed PAYE relief targeting workers earning up to KSh60,000 would release over KSh31 billion back into the economy as usable household income,” the federation stated.
Union says reforms would boost economy
The labour body argued that increasing disposable income among workers would stimulate household spending, support local businesses and strengthen economic growth through increased demand for goods and services.
“This would significantly stimulate consumption, improve household welfare, support local businesses, increase demand for goods and services and contribute to broader economic growth through increased domestic spending,” COTU said.
The union maintained that easing the tax burden on salaried Kenyans would also improve living standards at a time when many households are struggling with the rising cost of living.
Concerns over multiple deductions
COTU further warned that workers are already burdened by several mandatory deductions, including contributions linked to the Social Health Authority (SHA), increased National Social Security Fund (NSSF) rates and the Affordable Housing Levy.
The federation cautioned that without targeted tax relief measures, many low- and middle-income earners would continue experiencing declining purchasing power despite salary increments.
COTU rejects proposed mobile phone tax
The union also opposed the proposed 25 per cent excise duty on mobile phones and cellular devices contained in the Finance Bill 2026.
According to COTU, the tax could undermine Kenya’s digital economy by increasing the cost of communication gadgets and limiting access to online opportunities.
The federation warned that higher taxation on mobile devices would disproportionately affect young people, freelancers, digital entrepreneurs and gig workers who rely heavily on affordable internet-enabled devices.
Push for protection of gig economy workers
COTU additionally called for the creation of a legal framework to protect workers operating in the gig economy through digital platforms.
The federation proposed portable social protection benefits, fair dispute resolution systems and safeguards against arbitrary deactivation from online platforms.
It also supported proposed restrictions on gratuity tax exemptions tied to employees serving under continuous contracts for at least three years, saying the move could encourage stable employment and reduce abuse of pension-related tax incentives.
Finance Bill scrutiny intensifies
The proposals will now be reviewed by the National Assembly’s Finance and National Planning Committee as lawmakers continue receiving views from stakeholders ahead of debate on the Finance Bill 2026.
The Bill has attracted growing public attention amid concerns over increased taxation, high living costs and the broader economic impact of the government’s revenue-raising measures.
