NAIROBI, Kenya — President William Ruto has announced plans to exempt low-income earners from paying Pay As You Earn (PAYE) tax, in a move aimed at easing pressure on salaried Kenyans struggling with the rising cost of living.
Speaking during the National Prayer Breakfast on Thursday, May 28, Ruto said he had directed the National Treasury to prepare proposals that would remove PAYE deductions for workers earning up to Sh30,000 per month.
If approved by Parliament, the proposal would raise the current tax-free threshold from Sh24,000 to Sh30,000, effectively increasing take-home pay for thousands of workers.
Ruto Says Low-Income Workers Need Relief
The President said the government was reviewing taxation policies affecting low-income earners amid growing concern over multiple statutory deductions on workers’ salaries.
“I told the Treasury that it is time to look at how we can slow down, especially for the low-income earners, and remove some taxes from them,” Ruto said.
“That is why we will be putting a proposal before Parliament to say that all the low-income earners, the people who earn up to Sh24,000, have been paying PAYE at 10 pc, and we are saying they will not pay anymore,” he added.
Currently, employees earning from Sh24,000 are subjected to PAYE at a rate of 10 pc.
Treasury to Table Proposal Before Parliament
Ruto acknowledged that the proposed tax relief could create a revenue shortfall estimated at about Sh40 billion.
However, he argued that the government was exploring alternative ways of stimulating economic growth without overburdening ordinary workers through taxation.
The President defended the move as part of broader economic reforms intended to protect vulnerable households while supporting increased spending power and productivity.
Pressure Mounts Over Multiple Deductions
The announcement comes amid growing calls from stakeholders for a review of payroll taxes and statutory deductions affecting salaried Kenyans.
Last week, the Kenya Bankers Association (KBA), while making submissions on the Finance Bill 2026 before the National Assembly Finance and National Planning Committee, called for expansion of PAYE bands and reduction of marginal tax rates.
KBA argued that lowering PAYE would stimulate economic activity, improve household spending and support GDP growth.
“The assurance is that the Sh28 billion will be offset within the first year, and what this will result in is the fact that in the second and the third year we will be able to generate much higher taxes,” said KBA Chief Executive Officer Raimond Molenje.
The bankers further proposed a five-percentage-point PAYE reduction across all income bands, arguing that it could expand the economy by approximately Sh42 billion.
Debate Around Finance Bill 2026 Continues
The PAYE review debate comes as Parliament continues receiving public submissions on the Finance Bill 2026, which has attracted scrutiny over taxation measures and the cost of living.
Workers and labour groups have increasingly raised concerns over deductions linked to the Affordable Housing Levy, Social Health Authority contributions, and enhanced NSSF rates, arguing that disposable incomes have significantly declined in recent years.
The Treasury is expected to formally present the PAYE proposal to Parliament as part of ongoing amendments to the Finance Bill 2026.
