The Kenya Bankers Association (KBA) is now pushing the government to reduce Pay As You Earn (PAYE) tax by five per cent across all salary brackets, saying the move could put more money in workers’ pockets and help revive the economy.
In a statement released on Thursday, the bankers said many Kenyans are struggling with the rising cost of living and reduced spending power, making it necessary for the government to lower the tax burden on employees.
KBA Chief Executive Officer Raimond Molenje said a uniform five per cent PAYE reduction would inject nearly Sh28 billion back into the economy every year through increased disposable income.
According to the association, the extra cash in workers’ pockets would likely go directly into household spending, boosting demand for goods and services across different sectors.
“We are for a uniform five per cent reduction in PAYE across all income bands to stimulate economic growth, strengthen household purchasing power and enhance long-term fiscal sustainability,” Molenje said.
The bankers believe the move could also benefit small businesses, especially MSMEs, which depend heavily on consumer spending.
KBA estimates that the additional spending could generate close to Sh42 billion in economic activity while also supporting the creation of around 36,000 jobs annually.
The association further argued that if workers have more disposable income, many would improve their savings and borrowing ability, potentially unlocking up to Sh140 billion in formal lending for households and businesses.
According to the bankers, the increased economic activity would eventually help the government recover the revenue lost through the tax cut.
The proposal comes at a time when many Kenyans are feeling the strain of high taxes, expensive basic commodities and stagnant incomes.
KBA says real incomes have dropped by between 10.7 and 12 per cent over the last five years, leaving many households struggling to keep up with daily expenses.
The push by bankers comes just weeks after the government signalled plans to lower PAYE for low-income earners.
Treasury Cabinet Secretary John Mbadi recently said the government is still considering tax relief for workers earning Sh30,000 and below despite the proposal not appearing in the Finance Bill 2026.
Speaking earlier this week during a briefing on the Finance Bill, Mbadi said discussions on raising the tax-free income threshold from Sh24,000 to Sh30,000 were still ongoing.
“Before the public participation process ends, we will make a decision,” Mbadi said.
He added that amendments could still be introduced before the Finance Bill is passed at the end of June.
