NAIROBI, Kenya — Low and middle-income earners in Kenya could soon enjoy significant tax relief under a new government proposal aimed at easing the cost of living and stimulating consumer spending.
The National Treasury has announced plans to scrap income tax entirely for salaried workers earning below Sh30,000 a month, while reducing tax rates for those earning up to Sh50,000, in what would mark one of the most sweeping tax cuts for workers in recent years.
Treasury Cabinet Secretary John Mbadi said the proposal, which will be tabled in Parliament as an amendment, is intended to put more disposable income into workers’ pockets and revive a slowing economy.
Speaking on Sunday during the Budget and Privatisation Public Engagement Forum at Kiambu National Polytechnic, Mbadi said salaried employees are disproportionately burdened by taxation despite forming a relatively small segment of the population.
Kenya has about 3.5 million salaried workers, according to Treasury estimates.
“These Kenyans are carrying the burden for almost everybody, and it is not fair,” Mbadi said. “Anyone earning below Sh30,000 should pay zero tax. Zero. And for those earning below Sh50,000, we are going to reduce tax.”
He said the decision had been reached following consultations with President William Ruto and was designed to boost household spending at a time when consumer demand has weakened.
Economy “Choking” From Low Spending
Mbadi linked the tax relief plan to declining purchasing power, saying many households have cut back sharply on everyday spending due to rising prices.
“We have looked at the economy and we can see it is choking,” he said, noting that consumers are buying less food and basic goods because they lack disposable income.
Treasury believes that allowing workers to retain more of their earnings will increase demand across the economy, benefiting traders, manufacturers and service providers.
Treasury Defends Debt Strategy
In the same address, Mbadi defended the government’s handling of public finances, saying Kenya narrowly avoided a debt default that has hit several African economies.
He recalled that the International Monetary Fund (IMF) had earlier warned that six African countries were at risk of defaulting between 2021 and 2022.
“Five of those countries have since defaulted. It is only Kenya that has not,” he said, citing Ghana, Ethiopia, Chad and Mozambique among those affected.
Mbadi warned that a default would have forced Kenya into strict IMF-led rescue programmes, including massive public sector layoffs and sharp salary cuts.
He said such measures could have seen half of civil servants, teachers and chiefs lose their jobs, while the number of Members of Parliament and county assembly representatives would also have been drastically reduced.
Avoiding Painful IMF Conditions
The Cabinet Secretary drew parallels with the structural adjustment programmes of the 1990s, when large numbers of workers were retrenched under IMF-backed reforms.
“That is what was facing us,” he said, arguing that fiscal discipline had spared the country from a similar fate.
Kenya’s public debt currently stands at over 70 per cent of GDP, but Treasury says ongoing fiscal reforms and IMF-supported programmes have helped the country retain access to international markets and avoid the currency shocks and inflation spikes experienced by defaulting nations.
Acknowledging public frustration over high living costs and unemployment, Mbadi urged Kenyans to weigh current hardships against the risks of an economic collapse.
“How would you have done business in an economy that has collapsed?” he asked.
If approved by Parliament, the proposed tax changes would take effect in the next financial cycle, offering relief to millions of Kenyan workers grappling with rising expenses.
