Kenya Bankers Advocate Nationwide PAYE Reduction to Boost Worker Income and Drive Economic Growth

Kenya’s banking sector has welcomed the government’s decision to exempt low-income earners from Pay As You Earn (PAYE) tax. However, industry leaders argue the relief should extend to all salaried workers. They are calling for a broader approach.

The Kenya Bankers Association (KBA) recommends cutting PAYE rates by 5% across every income bracket. They also propose capping the top rate at 30%, in line with corporate tax. The lobby says this strategy would maximize the economic benefits of the government’s initial move.

KBA notes that a wider PAYE reduction would leave workers with more disposable income. This, in turn, would increase household spending and stimulate sectors such as agriculture, manufacturing, and services. Greater consumption could also boost government revenue through VAT, excise duties, and corporate taxes.

While the zero-rating for earners under KSh 30,000 is seen as “welcome relief” amid high living costs, the banking sector warns that other deductions, including rising National Social Security Fund (NSSF) contributions, continue to strain both employees and employers.

“The current tax burden limits the full impact of this reform,” said KBA CEO Raimond Molenje. “A uniform PAYE reduction will increase take-home pay, strengthen consumer spending, and support private sector expansion.”

KBA adds that higher disposable income could improve loan repayment, expand credit access for households and small businesses, and foster entrepreneurship. They argue that a modest reduction in PAYE would create multiple economic benefits.

The association also believes that easing PAYE could help offset the typical pre-election slowdown. Extra income allows workers to spend and invest, creating jobs and increasing private sector lending.

The banking sector pledged continued support for the government’s reforms. KBA aims to ensure the changes translate into real growth and maintain strong private sector credit expansion throughout 2026 and beyond.

The lobby emphasizes that wider tax relief will enhance Kenya’s economic resilience. It will increase workers’ financial freedom, encourage business investment, and stimulate consumption while reinforcing productive sectors across the country.