The Kenya Bankers Association is pressing the government to extend PAYE relief across all income bands, after the Finance Bill 2026 dropped promised tax cuts that millions of salaried workers had expected.
- •The lobby group is calling for a uniform 5% reduction in PAYE rates across all existing tax brackets and a hard cap of 30% on the highest rate, aligning personal income tax with the corporate tax rate.
- •Under the current structure, companies pay 30% corporate tax while the top PAYE rate sits at 35%, a gap KBA argues is a policy distortion that penalises employment income over corporate earnings.
- •The association has explicitly linked the proposed cuts to improving loan repayment capacity, expanding household and MSME credit access, and supporting its stated target of double-digit private sector credit growth in 2026.
The association's proposed band structure would exempt income below KSh 30,000 from PAYE entirely, tax earnings between KSh 30,001 and KSh 50,000 at 15%, KSh 50,001 to KSh 100,000 at 20%, KSh 100,001 to KSh 400,000 at 25%, and income above KSh 400,000 at 30%.
KBA estimates the reform would release KSh 28.1 billion in additional disposable income annually, generating KSh 42 billion in GDP output and supporting 36,000 new jobs through consumption-driven multiplier effects.
Higher disposable incomes directly improve the quality of member banks' loan books.
The push comes after both President William Ruto and Treasury Cabinet Secretary John Mbadi publicly committed earlier this year to exempting workers earning below KSh 30,000 from PAYE and cutting rates for those earning up to KSh 50,000. The Treasury had prepared a separate Tax Laws (Amendment) Bill 2026 to implement the cuts before shelving it. The Finance Bill 2026, published last month, contains no PAYE relief measures.
Treasury has defended the omission, citing the fiscal pressure from the Iran conflict, which prompted an emergency halving of VAT on petroleum products at a cost of KSh 12.9 billion over three months. CS Mbadi revised Kenya's 2026 growth forecast from 5.3% to 5% and signalled that PAYE reform would have to wait while the government manages the revenue shortfall.
The broader context compounds the urgency for workers. NSSF contributions are rising progressively to 6% of gross pay by February 2027, the SHA levy stands at 2.75%, and the Housing Levy at 1.5%. With PAYE relief now absent from the Finance Bill, salaried Kenyans face a widening gap between gross and net pay, with no legislative remedy in sight.
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