KBA Says PAYE Cut Could Create 36,000 Jobs as Pressure Mounts to Ease Kenya’s Tax Burden

Kenya, 15 May 2026 - The Kenya Bankers Association (KBA) is pushing for a reduction in Pay As You Earn (PAYE) tax, arguing that lowering the burden on salaried workers could stimulate economic activity, increase household spending and create up to 36,000 new jobs.

The proposal comes at a time when Kenyan households continue to struggle with the high cost of living, stagnant incomes and rising deductions, with pressure mounting on the government ahead of the Finance Bill 2026.

According to estimates cited by KBA, a 5% reduction in PAYE could inject approximately KSh 28 billion back into the economy, potentially triggering a wider Sh42 billion expansion in GDP due to increased consumer spending and business activity.

The banking lobby argues that workers have become increasingly constrained by taxation at a time when food prices, transport costs, school fees and utility bills continue to rise.

A reduction in PAYE, they say, would increase disposable income and allow households to spend more, ultimately benefiting businesses and supporting employment growth.

The proposal has emerged amid wider discussions around tax reforms expected in the Finance Bill 2026, where policymakers are under pressure to balance revenue collection with economic recovery.

Treasury officials have already hinted at possible adjustments to both income tax and VAT measures as the government seeks to ease public pressure following months of criticism over heavy taxation.

There have also been discussions around exempting Kenyans earning below KSh 30,000 from PAYE altogether, though reports indicate the proposal had not formally been included in the Finance Bill framework at the time of publication.

PAYE remains one of the government’s most reliable revenue streams because it is deducted directly from salaries before workers receive their income.

However, many salaried Kenyans argue that the deductions have become unsustainable when combined with other statutory levies such as the Housing Levy, Social Health Insurance Fund (SHIF) contributions and pension deductions.

For middle-income earners especially, take-home pay has increasingly failed to keep pace with inflation.

Economists supporting the KBA proposal argue that lower taxation could help revive consumption-driven sectors such as retail, manufacturing, hospitality and transport, which depend heavily on household spending power.