Kenya’s banking sector is urging the government to introduce broader tax relief measures for salaried workers, warning that the current tax burden is straining households and slowing economic growth.
The Kenya Bankers Association has proposed a 5% reduction in Pay As You Earn (PAYE) tax across all income bands, arguing that this would increase disposable income and stimulate spending across the economy.
While the government has already proposed exempting workers earning KSh30,000 and below from PAYE, bankers say this is not enough to address the broader financial pressure facing middle- and high-income earners.
According to the association, the cumulative impact of taxes and statutory deductions — including housing levy, health insurance, and pension contributions — has significantly reduced take-home pay, with real wages declining in recent years.
Bankers argue that easing the tax burden would not only benefit workers but also boost the economy by increasing consumer spending, supporting businesses, and improving loan repayment rates.
They also propose capping the highest income tax rate at 30%, aligning it with corporate tax levels, to create fairness in the tax system.
The proposal comes at a time when Kenya is grappling with rising cost of living and economic pressure, with experts warning that reduced purchasing power is slowing growth in key sectors.
While tax relief could provide immediate relief to households, the government will have to balance this with its need to raise revenue, setting up a key policy debate ahead of the Finance Bill 2026.
The Kenya Bankers Association has proposed a 5% reduction in Pay As You Earn (PAYE) tax across all income bands, arguing that this would increase disposable income and stimulate spending across the economy.
While the government has already proposed exempting workers earning KSh30,000 and below from PAYE, bankers say this is not enough to address the broader financial pressure facing middle- and high-income earners.
According to the association, the cumulative impact of taxes and statutory deductions — including housing levy, health insurance, and pension contributions — has significantly reduced take-home pay, with real wages declining in recent years.
Bankers argue that easing the tax burden would not only benefit workers but also boost the economy by increasing consumer spending, supporting businesses, and improving loan repayment rates.
They also propose capping the highest income tax rate at 30%, aligning it with corporate tax levels, to create fairness in the tax system.
The proposal comes at a time when Kenya is grappling with rising cost of living and economic pressure, with experts warning that reduced purchasing power is slowing growth in key sectors.
While tax relief could provide immediate relief to households, the government will have to balance this with its need to raise revenue, setting up a key policy debate ahead of the Finance Bill 2026.
