NAIROBI, Kenya — The Central Organization of Trade Unions Kenya has urged Parliament to revise Pay As You Earn (PAYE) tax bands for workers earning up to Sh60,000 monthly, arguing that the Finance Bill 2026 fails to ease the growing financial burden on salaried Kenyans.
In submissions presented to Parliament on the Finance Bill 2026, the labour federation said workers’ purchasing power has been significantly eroded by rising inflation, high fuel and food prices, transport costs, and increased statutory deductions.
COTU Proposes Lower Payroll Taxes
The union is seeking an upward adjustment of the tax-free threshold, reduced payroll taxes for low- and middle-income earners, and automatic annual inflation adjustments to PAYE bands.
According to COTU, such reforms would protect workers from “bracket creep,” where inflation pushes employees into higher tax bands despite stagnant real incomes.
“According to COTU (K) research, the economic and education department, the proposed PAYE relief targeting workers earning up to Kshs. 60,000 would release over Sh31 billion back into the economy as usable household income,” the federation said.
The union argued that increased disposable income would stimulate household spending, improve welfare, and support economic growth through higher demand for goods and services.
“This would significantly stimulate consumption, improve household welfare, support local businesses, increase demand for goods and services, and contribute to broader economic growth through increased domestic spending,” COTU added.
Concerns Over Rising Worker Deductions
The federation said workers are already grappling with multiple mandatory deductions, including contributions linked to the Social Health Authority, enhanced National Social Security Fund rates, and the Affordable Housing Levy.
COTU warned that without targeted tax relief, many low- and middle-income earners would continue facing declining living standards despite salary adjustments.
Opposition to Mobile Phone Excise Tax
The labour body also opposed the proposed 25pc excise duty on mobile phones and cellular devices contained in the Finance Bill.
According to the federation, the tax could undermine Kenya’s digital economy by increasing the cost of communication devices and limiting access to online work and business opportunities.
The union cautioned that higher taxation on mobile devices could disproportionately affect young people, freelancers, and digital entrepreneurs who depend on affordable internet-enabled tools.
Push for Gig Worker Protections
COTU further called for the establishment of a legal framework to protect gig economy workers operating on digital platforms.
The federation proposed portable social protection benefits, fair dispute resolution mechanisms, and safeguards against arbitrary deactivation from digital platforms.
It also backed proposed restrictions on gratuity tax exemptions tied to employees serving under continuous contracts for at least three years, arguing the measure could promote stable employment and reduce abuse of pension-related tax incentives.
Finance Bill Review Ongoing
The proposals will now be considered by the National Assembly’s Finance and National Planning Committee as lawmakers continue receiving submissions from stakeholders ahead of debate and possible amendments to the Finance Bill 2026.
The Finance Bill has attracted heightened public scrutiny amid concerns over taxation, rising living costs, and the broader economic impact of government revenue-raising measures.
