Kenya’s banking industry has urged the government to make deeper changes to income tax rules, saying workers need more relief to cope with the high cost of living.
The Kenya Bankers Association has asked President William Ruto’s administration to lower Pay As You Earn tax across all income groups.
The lobby believes that wider tax cuts would help households keep more money and support economic activity.
In a policy statement released on Wednesday, February 4, the association proposed a uniform five per cent reduction in PAYE rates for all tax bands.
According to the bankers, Kenya depends heavily on taxes collected from salaries, which puts a heavy burden on both employees and employers.
They noted that rising statutory deductions are making it harder for workers to manage their daily expenses. The recent increase in National Social Security Fund contributions was highlighted as one of the main pressures affecting take home pay.
The bankers welcomed the government’s plan to remove PAYE for workers earning up to Ksh30,000.
They described the move as timely support for low income earners who are struggling with rising prices of food, transport, and housing.
Even so, they argued that the measure alone may not be enough to create meaningful financial relief.
They said many workers still face a combination of taxes and deductions that reduce their disposable income and limit their spending power.
The association also called on the government to set a maximum PAYE rate of 30 per cent in line with the National Tax Policy.
This suggestion came shortly after President Ruto announced plans to reduce PAYE from 30 to 25 per cent for workers earning up to Ksh50,000.
While the bankers welcomed the announcement, they insisted that broader changes are needed to support economic recovery and encourage more financial activity.
KBA believes that lowering income taxes would help boost household consumption and increase demand for goods and services.
They argued that when people have more money to spend, businesses benefit through higher sales, which can help drive economic growth.
The association also said increased spending could lead to higher use of banking products such as loans and credit facilities.
In their view, stronger economic activity could eventually expand government revenue through indirect taxes like value added tax.
The proposal adds to ongoing discussions about tax reforms and the balance between government revenue needs and the financial pressure facing Kenyan workers.
The bankers are calling for measures that support both economic growth and the welfare of households.
