The Kenya Bankers Association (KBA) has called on the Government to cut Pay As You Earn (PAYE) tax by five percentage points for all workers. The proposal goes further than President William Ruto’s plan to exempt only those earning Sh32,333 or less a month.
Speaking on Thursday, October 22, 2026, during the release of the 2025 Total Tax Contribution Report, KBA Chief Executive Officer Raimond Molenje said a cut across all income brackets would boost spending, create jobs and help borrowers repay loans.
“From the banking sector, private sector and employed Kenyans, we are looking to the government to build this trust in Kenya by implementing the five per cent across the board,” he said.
The KBA estimates that the cut would put about Sh28 billion a year back into workers’ pockets and generate nearly Sh42 billion in immediate economic output through higher consumption.
A worker earning Sh50,000 a month would take home an extra Sh2,244 a month, or Sh26,955 a year, assuming other reliefs remain unchanged.
Molenje illustrated the point with a teacher earning Sh60,000. “If we make an adjustment to PAYE by just five per cent, a teacher earning that amount would have an additional Sh3,000,” he said.
“That teacher will not take a flight to Dubai to spend the Sh3,000 extra. What the teacher will do is walk straight to Gikomba and buy a school uniform for the child, a purchase that had been pending.”
He explained that such spending would ripple through the economy, from the tailor who sells the uniform and can then repay a loan, buy another sewing machine and hire a worker, to that worker spending at the local market.
“That first employee will go to Mama mboga and be able to buy some groceries,” he said. “All that change, we are paying tax. All that change, we are creating employment. All that change, we are repaying our loans because we partnered in the past on matters loans.”
Molenje welcomed the recent fall in bad loans but said the trend must be sustained.
“We are happy the non-performing loans are coming down. However, we have to sustain that,” he said. “Even as we lend more, we need to ensure that Kenyans are disciplined and able to repay their loans. That will happen if we have more consumption within the economy.”
He said the proposal was about more than tax relief.
“The proposed 5% tax cut for all workers is not merely about putting more money in people’s pockets,” he said. “What we are looking for is trust.”
He urged the Government to engage with the private sector on the proposal.
“Let’s have this conversation. Let’s look at how we grow the economy, create more jobs and restore trust in government.”
President Ruto announced the plan to exempt low-income earners from PAYE during the Mashujaa Day celebrations in Eldoret on October 20, 2026, raising the threshold from an earlier proposal of Sh30,000.
Under the current system, a monthly personal relief of Sh2,400 offsets PAYE on the first Sh24,000 of taxable income, while earnings above that are taxed at progressively higher rates.
Treasury Cabinet Secretary John Mbadi has said the Government will table an amendment in Parliament in November to put the exemption into law. He cautioned that a uniform cut across all income brackets may not be possible immediately but could be considered in future tax reviews.
The KBA has pushed for broader PAYE relief since December 2025, when it proposed raising the minimum taxable income to Sh30,000 and lowering the highest PAYE rate to 30 per cent.
