President William Ruto has announced plans to exempt low-income earners from paying Pay As You Earn (PAYE) tax, in what the government says is part of efforts to cushion Kenyans from the rising cost of living.
Speaking during the National Prayer Breakfast on Thursday, May 28, the President revealed that he had directed the National Treasury to develop proposals that would remove PAYE deductions for employees earning up to Sh30,000 monthly.
If Parliament approves the proposal, the move would raise the current tax-free threshold from Sh24,000 to Sh30,000, potentially increasing disposable income for thousands of salaried workers across the country.
Ruto Says Low-Income Earners Need Support
Ruto said the government was reviewing tax measures affecting ordinary workers amid growing public concern over increased deductions and the high cost of living.
“I told the Treasury that it is time to look at how we can slow down, especially for low-income earners, and remove some taxes from them,” the President said.
He noted that workers earning from Sh24,000 currently pay PAYE at a rate of 10 percent, but the government now wants to eliminate that burden for lower-income earners.
The President argued that easing payroll taxes would help workers retain more of their income at a time when many households are struggling with rising expenses.
Treasury Expected to Submit Proposal
According to Ruto, the Treasury is expected to formally present the proposal before Parliament as part of ongoing discussions around the Finance Bill 2026.
The President acknowledged that the tax relief could result in an estimated Sh40 billion reduction in government revenue, but insisted the move was necessary to stimulate economic activity and ease financial pressure on workers.
He said the government was exploring alternative strategies to grow the economy without placing excessive tax burdens on ordinary Kenyans.
Growing Pressure Over Worker Deductions
The proposed PAYE changes come amid increasing calls from labour groups, financial institutions and workers for reforms to payroll taxation.
Stakeholders have raised concerns over multiple statutory deductions, including contributions to the Affordable Housing Levy, the Social Health Authority and enhanced National Social Security Fund (NSSF) rates.
Last week, the Kenya Bankers Association (KBA), while presenting submissions on the Finance Bill 2026 before the National Assembly Finance and National Planning Committee, proposed a review of PAYE bands and lower marginal tax rates.
KBA Chief Executive Officer Raimond Molenje argued that reducing PAYE could boost household spending, stimulate economic growth and increase government revenues in the long term.
The association also proposed a five-percentage-point reduction across all PAYE bands, saying the move could expand the economy significantly through increased consumer spending.
Finance Bill Debate Continues
The latest announcement adds to the ongoing debate surrounding the Finance Bill 2026, which continues to attract scrutiny over proposed taxation measures and their impact on living standards.
Labour unions and economic stakeholders have repeatedly warned that rising deductions are eroding workers’ purchasing power, even as inflation and basic commodity prices remain high.
Parliament is expected to continue reviewing public submissions before making a final decision on the proposed amendments.
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