The Kenya Bankers Association (KBA) has urged the government to adopt a uniform reduction in Pay As You Earn (PAYE) tax rates across all income brackets, arguing that the move would generate stronger economic growth than targeted relief for low-income earners.
The proposal comes amid ongoing discussions on tax reforms aimed at easing the cost of living and increasing household spending power.
KBA Supports Broader Tax Relief
KBA Chief Executive Officer Raimond Molenje welcomed proposals to provide tax relief for lower-income earners but maintained that limiting the benefits to a small section of taxpayers would not produce the desired economic impact.
According to Molenje, broader tax relief would increase disposable income across the economy and stimulate consumption more effectively.
Bankers Propose 5 Percent PAYE Cut
The association is advocating for a uniform five percent reduction in PAYE rates across all income bands while capping the highest tax rate at 30 percent.
KBA estimates that such a measure could inject approximately Sh28 billion into households annually, leading to increased spending, business activity and investment.
Economic Activity Could Rise Significantly
The banking lobby argues that higher disposable incomes would translate into stronger demand for goods and services, benefiting businesses across multiple sectors.
According to its projections, the proposed tax adjustment could unlock more than Sh200 billion in economic activity while also supporting job creation and improving government revenue collections through increased consumption and value-added tax receipts.
Treasury Drops Relief Plan
Despite earlier discussions on tax relief measures, the National Treasury opted not to include the proposed PAYE changes in the Finance Bill 2026.
Officials cited concerns over a potential Sh35 billion revenue shortfall that could widen the country’s fiscal deficit.
The decision disappointed many workers who had anticipated lower tax deductions amid rising living costs and increased statutory contributions.
Debate on Tax Reform Continues
As Parliament reviews the Finance Bill 2026, stakeholders continue to debate the best approach to balancing tax relief, economic growth and government revenue needs.
The Kenya Bankers Association maintains that a broad-based PAYE reduction would provide a stronger boost to economic activity while helping households cope with mounting financial pressures.
