Bankers Urges Govt to Reduce PAYE by 5% to Strengthen Economy

The Kenya Bankers Association (KBA) has urged the government to consider reducing Pay As You Earn (PAYE) by 5% for all workers across the country.

In a statement, KBA stated that the move aims to strengthen the economy and stimulate job creation across key productive sectors such as agriculture and manufacturing.

“We urge the Government to consider a 5% PAYE reduction for all workers to strengthen the economy and create jobs by supporting growth in productive sectors such as agriculture and manufacturing,” read part of the statement.

In its proposal, the banking sector lobby group argues that higher take-home pay would increase household incomes and boost economic activity through increased consumer spending.

KBA Says PAYE Cut Could Boost Jobs and Lending

According to KBA, the proposed tax reduction could release approximately Ksh 28.1 billion annually into households, generating an estimated Ksh 42 billion in immediate economic activity.

The association further argued that increased disposable income would support the creation of around 36,000 new jobs each year, particularly within the Micro, Small, and Medium Enterprises (MSME) sector.

Additionally, KBA revealed that increased disposable income among workers would improve borrowing capacity and savings, unlocking up to Ksh140 billion in formal lending for businesses and households.

“The increased disposable income will support around 36,000 new jobs each year, unlock up to Ksh 140 billion in lending capacity, and contribute to an estimated Ksh 210 billion GDP expansion, strengthening household consumption, MSMEs, and overall economic growth,” read part of the statement.

Also Read: KRA Reminds Taxpayers on Fringe Benefit Tax and Deemed Interest Rate

Govt Reveals Plans to Have Tax-free Salaries in Kenya

Meanwhile, Kenyan workers continue to face rising statutory deductions, with the key being PAYE of up to 35%, Affordable Housing Levy 1.5%, SHIF which is 2.75 % of gross income, and a recent increase in NSSF contributions.

As a result, the government is working on providing tax relief to low-income earners while pushing for an expansion of the tax base, including going into the informal sector.

Also Read: Mbadi Speaks on PAYE Rates and Time for Filing KRA Returns

National Treasury CS John Mbadi previously stated that the government is working to have individuals earning Ksh30,000 and below enjoy tax-free salaries.

Mbadi added that those earning Ksh 50,000 and below are also under consideration for tax cuts under ongoing fiscal reforms tied to the 2026-27 budget.

“We are working towards making sure that those who are earning Ksh 30,000 and below don’t pay taxes and those who are earning Ksh 50,000 and below have lower tax rates than what we are seeing today,” Mbadi said.

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Photo of Treasury CS John Mbadi speaking at a past press conference. PHOTO/Treasury