“Individuals Should Not Be Taxed Higher Than Corporations”: Bankers Makes Case for PAYE Relief

The Kenya Bankers Association (KBA) has proposed a uniform 5% reduction in Pay As You Earn (PAYE) tax across all income brackets. The lobby group argues that the tax cut would boost household spending, fortify businesses, and stimulate broader economic growth.

According to KBA’s projections, slashing PAYE by 5% would pump roughly Ksh28.1 billion annually directly into workers’ pockets through higher take-home pay. The association estimates that this extra cash would immediately trigger nearly Ksh42 billion in economic activity as consumers ramp up spending on goods and services.

“We urge the Government to consider a 5% PAYE reduction for all workers to strengthen the economy and create jobs by supporting growth in productive sectors such as agriculture and manufacturing,” the statement dated May 19, 2026, read in part.

The banking lobby designed the proposal to lift both struggling households and the economy’s primary productive sectors, with a special focus on agriculture, manufacturing, and small businesses. KBA points out that multiple deductions, including PAYE, the Affordable Housing Levy, SHIF contributions, and scaled-up NSSF payments, currently squeeze salaried Kenyans from all sides.

The association noted that workers have watched their real incomes steadily erode over the last five years, a decline that has severely crushed their purchasing power and restricted day-to-day household spending.

Under this new proposal, employees across every single salary bracket would retain a larger portion of their monthly earnings. This extra cushion would allow families to spend more, boost their savings, and increase personal investments.

KBA expects this additional consumer spending to spark a high demand for goods and services, ultimately helping small and medium enterprises expand their operations and ramp up production. Furthermore, the bankers’ lobby estimates that healthier household liquidity will drive stronger borrowing and increase credit uptake across the banking sector.

KBA projects that the proposed tax reduction could support approximately 36,000 new jobs annually by fueling business activity and accelerating MSME growth. The association also estimates that the move could unlock up to Ksh140 billion in additional lending capacity for commercial banks, ultimately injecting about Ksh210 billion into the country’s Gross Domestic Product (GDP).

The entire proposal hinges on a fundamental economic principle: higher consumption drives manufacturing and business expansion, which ultimately generates superior tax revenues through a more vibrant economy.

“Individuals should not be taxed higher than corporations,” KBA stated, pointing out that many salaried workers currently shoulder effective tax burdens that match or even exceed those of large corporate entities. The association maintains that its proposal perfectly aligns personal taxation with the state’s broader economic growth objectives while providing much-needed relief to Kenyan workers.

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