Relief in Sight as Banks Call for 5% PAYE Cut Across All Tax Bands
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The Kenya Bankers Association (KBA) has proposed a uniform 5% reduction in Pay As You Earn (PAYE) tax rates across all income bands, arguing that the move is essential to restore purchasing power, stimulate economic growth, and strengthen government revenue.
The proposal, aimed at the 2026/2027 fiscal cycle, comes as a direct response to a “perfect storm” of rising costs and increasing statutory deductions that have significantly eroded real wages over the last five years.
The government has recently moved to zero-rate PAYE for low-income earners (those making up to KES 30,000 per month).
“We welcome the Government’s proposal to zero-rate PAYE for workers earning up to KES 30,000 per month, as it provides timely relief in response to rising cost-of-living pressures facing Kenyan households and businesses,” Kenya Bankers Association stated.
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The association further said this measure will help offset the impact of the ongoing progressive increase in National Social Security Fund (NSSF) contributions, which will require both employers and employees to contribute up to six percent of pay by February 2027.
This means that both employers and employees will be required to contribute up to 6% of pay, a mandate that “presents a significant burden,” especially for those without private pension schemes.
“The cumulative effect of these deductions presents a significant burden for workers and employers without pension schemes, highlighting the need for complementary tax relief measures through PAYE for all workers,” the association stated.
Alignment with National Tax Policy
Increased take-home pay will also boost borrowers’ ability to repay loans and increase credit availability for households and Micro, Small, and Medium-Sized Businesses (MSMEs), encouraging investment, entrepreneurship, and programs like the ongoing NYOTA program.
“Increased take-home pay will also boost borrowers’ ability to repay loans and increase credit availability for households and Micro, Small, and Medium-Sized Businesses (MSMEs), encouraging investment, entrepreneurship, and programs like the ongoing NYOTA program. Also Read: Del Monte Loses Ksh 1.76 Billion Tax Battle Against KRA
The proposed five percent PAYE cut will contribute to reviving economic growth, creating formal and informal jobs in a variety of industries, and reversing the pattern of business slowdowns that are commonly seen in the run-up to general elections, which frequently lead to lower economic activity and worse revenue performance,” the association noted.
The proposed five percent PAYE cut will contribute to reviving economic growth, creating formal and informal jobs in a variety of industries, and reversing the pattern of business slowdowns that are commonly seen in the run-up to general elections, which frequently lead to lower economic activity and worse revenue performance.
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Kenya Bankers Association post on the Banking Industry 5% PAYE Reduction Proposal to Boost Growth. PHOTO/KBA/X
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