Kenya PAYE tax reform discussions

The Federation of Kenya Employers (FKE) has called for a review of Pay As You Earn (PAYE) tax bands, arguing that high taxation reduces worker disposable income and places pressure on businesses. The FKE noted that the formal economy is struggling to absorb the one million young people entering the job market each year, while the Retail Trade Association of Kenya (RETRAK) linked low consumer spending to sluggish production.

In response, National Treasury Cabinet Secretary John Mbadi announced that the government aims to complete the revision of PAYE tax structures by the end of September. This follows a directive from President William Ruto to reduce deductions for salaried workers. The Treasury is currently conducting public participation to gather stakeholder input, including recommendations from the Kenya Bankers Association. Preliminary proposals include exempting employees earning up to Ksh30,000 from PAYE and reducing the tax rate to 25 per cent for those earning between Ksh30,000 and Ksh50,000. The final proposals will be consolidated into a Tax Laws Amendment Bill for parliamentary approval.