The Kenyan government has proposed plans to scrap Pay As You Earn (PAYE) tax for workers earning below KSh 30,000 per month, in a move aimed at easing pressure on low-income earners facing rising living costs.
National Treasury Cabinet Secretary John Mbadi announced the proposal while speaking during a budget dialogue meeting in Meru County.
He said the government recognises that many Kenyans earning low wages spend almost their entire income on basic needs such as food, rent, transport, and school fees, leaving little or nothing to save.
According to Mbadi, taxing such incomes places an unfair burden on workers already struggling to make ends meet.
He revealed that the proposal was initiated by President William Ruto and has already been forwarded to Parliament for consideration and approval as part of broader tax reforms.
Treasury data shows that Kenya has approximately 3.06 million salaried workers, out of whom about 1.5 million earn KSh 30,000 or less.
If approved, these workers would be fully exempted from PAYE, allowing them to retain more of their earnings and improve their purchasing power.
For employees earning between KSh 30,000 and KSh 50,000, the government plans to reduce PAYE rates, lowering them from the current 30 per cent to a proposed range of between 5 and 25 per cent. This means an estimated 1.7 million Kenyans could benefit from reduced taxation.
CS Mbadi also raised concerns over tax non-compliance, noting that many eligible taxpayers are not paying the correct amounts, a situation he said affects the government’s ability to manage public debt and fund essential services.
However, he assured the public that enforcement will focus on encouraging voluntary compliance, not coercion.
The Treasury estimates that potential tax revenue should be between KSh 82 billion and KSh 100 billion, but currently only about KSh 17 billion is being collected, leaving a significant gap.
Mbadi said the proposed tax reforms are intended to restore household purchasing power, promote fairness in the tax system, and support economic growth, particularly for low- and middle-income earners.
If approved by Parliament, the measures are expected to bring financial relief to millions of Kenyans and form part of the government’s broader strategy to balance revenue collection with economic wellbeing.
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