Big Tax Break Coming for Kenyans Earning Below KSh50,000, Mbadi Announces

Low- and middle-income earners in Kenya are set to get significant tax relief as the government rolls out a plan aimed at easing pressure on salaried workers earning below Ksh50,000 per month.

The National Treasury says the proposed measures will leave more money in workers’ pockets, boost consumer spending, and help cushion households against the rising cost of living.

Treasury Cabinet Secretary John Mbadi announced the plan on Sunday while addressing the Budget and Privatisation Public Engagement Forum at Kiambu National Polytechnic. He said the government intends to scrap income tax entirely for workers earning below Ksh30,000 and reduce tax rates for those earning up to Ksh50,000.

“Those salaried Kenyans, we have 3.5 million Kenyans earning a salary. They are carrying the burden on almost everybody. It is not fair. We have decided that I am taking a proposal amendment to Bunge. I am not even waiting for the Finance Bill. Anybody earning below 30,000 in this country should pay zero tax. Zero,” Mbadi said.

He added that the proposal has full backing from President William Ruto and forms part of a broader strategy to stimulate the economy.

“And anyone earning below 50,000 in this country, we are going to reduce tax. And this is what the government has decided. We have sat down with the President, and we have agreed. We are reducing the tax rate by 5% to 25%. We want to give you something in your pocket so that you can spur demand in the economy,” he said.

Mbadi linked the decision to signs of economic slowdown, pointing to reduced consumer purchasing power as a major concern.

“Because we have looked at the economy, and we can see the economy choking. Because people don’t have money in their pockets to buy from you. Hakuna mtu ananunua mboga. Badala ya kununua mboga ya sasa hivi mtu anakuja kununua mboga four leaves,” he said.

In the same address, the Treasury Cabinet Secretary defended the government’s handling of Kenya’s public finances, saying the country narrowly avoided a debt default that has hit several African economies.

“In 2021–2022, the IMF predicted that six countries in Africa were going to default on debt repayment. If you fail to pay your debts, it means that it is a failed economy. It is a collapsed economy,” Mbadi said.

He warned that a default would have pushed Kenya into strict IMF rescue programmes with far-reaching consequences for workers and public servants.

“What will happen is IMF will come calling. They will say, fine, we will help you, but on conditions. Number one, you must cut your civil service by 50 per cent. Half of the chiefs go home. Half of the teachers go home,” he explained.

According to Mbadi, elected leaders would not have been spared under such conditions.

“The number of Members of Parliament could have dropped from 290 to 145, while Members of County Assemblies would have reduced from about 1,400 to roughly 700. Salaries, including that of the president, would have been slashed by half,” he said.

He recalled the structural adjustment programmes during former President Daniel arap Moi’s era, when thousands of workers lost their jobs with minimal compensation.

“Remember, there was this structural programme during Mzee Moi’s time. We had not even defaulted, but one of the conditions was retrenchment. Take the staff home. That is what was facing us,” Mbadi said.

Highlighting Kenya’s position relative to its peers, Mbadi noted that most of the countries the IMF had flagged have since defaulted.

“Five countries out of those six have defaulted. In the neighbourhood here is Ethiopia. The other ones were Ghana, Chad and Mozambique. It is only Kenya which has not defaulted. It is only Kenya,” he said.

While acknowledging public frustration over high living costs and unemployment, Mbadi urged Kenyans to separate everyday hardships from the wider economic picture.

“I know many of us have been told that this government has done nothing, and we believe it. And there is nothing wrong with believing, because we can’t think the same. If you find two people always agreeing, one of them is not thinking, or both,” he said.

He challenged business owners and traders to reflect on what operating in a collapsed economy would have meant.

“How would you have done business in an economy that has collapsed?” Mbadi asked.

Despite public debt standing at over 70 per cent of GDP, Kenya has maintained access to international financial markets through fiscal reforms and IMF-backed programmes. Unlike countries such as Ghana and Ethiopia, which faced currency pressure, inflation spikes and debt restructuring after defaulting, Kenya has avoided a full-blown debt crisis.

If implemented, the proposed tax cuts could offer immediate relief to millions of salaried Kenyans while injecting fresh momentum into the economy through increased household spending.

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