The Kenya Bankers Association (KBA) is calling on the government to reduce Pay As You Earn (PAYE) tax by five percentage points across all income brackets, advocating for a broader tax relief strategy than President William Ruto’s current proposal to exempt workers earning Ksh32,333 or less per month.
KBA Chief Executive Officer Raimond Molenje made the compelling case on Thursday, October 22, during the official launch of the 2025 Total Tax Contribution Report. He highlighted that tax relief must benefit workers at every income level to effectively rebuild public confidence in governance and spur economic activity.
“As we make Pay As You Earn adjustments, let’s consider how we can help Kenyans restore trust in their government. The proposed 5% tax cut for all workers is not merely about putting more money in people’s pockets,” Molenje said.
Molenje explained that a sweeping PAYE reduction directly boosts workers’ take-home pay while encouraging sustained contributions to the national economy.
According to KBA’s economic projections, the sweeping tax cut could return approximately Ksh28 billion annually into the hands of workers. This injection of disposable income has the potential to significantly boost consumer spending and drive demand for goods and services, ultimately generating nearly Ksh42 billion in immediate economic output.
KBA Proposal vs. President Ruto’s Exemption Plan
The KBA’s recommendation offers a wider alternative to President Ruto’s targeted plan, which seeks to exempt workers earning Ksh32,333 or less per month from paying PAYE entirely. The government initially proposed a Ksh30,000 threshold before President Ruto announced the higher cap during Mashujaa Day celebrations in Eldoret.
National Treasury Cabinet Secretary John Mbadi confirmed that the government plans to introduce a formal amendment bill to Parliament in November to enact the lower-income exemption. The bill will undergo standard legislative debates and approval processes before implementation.
Addressing attendees at the KBA event, CS Mbadi cautioned that the government might lack the financial headroom to implement a uniform 5% PAYE cut immediately, though he noted that the state could evaluate the proposal during future tax reviews.
Under Kenya’s current tax framework, resident employees enjoy a monthly personal relief of Ksh2,400, effectively offsetting PAYE on the first Ksh24,000 of taxable income. Earnings exceeding that threshold face progressive tax rates.
KBA has actively pushed for broad-based tax reforms since December 2025, previously advocating for raising the minimum taxable income to Ksh30,000 and capping the top PAYE rate at 30 percent to help households and local businesses thrive.
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