Wayne Lumbasi
The Kenyan government has announced plans to exempt about 1.5 million low income earners from Pay As You Earn income tax, a move aimed at easing the cost of living and increasing disposable income for workers at the lower end of the wage scale.
Under the proposal, employees earning up to KSh 30,000 per month would no longer be subject to PAYE deductions. The adjustment represents an increase from the current tax free threshold and is expected to bring immediate relief to millions of households struggling with rising prices of food, fuel, housing and transport.
The announcement forms part of a broader tax reform agenda being advanced by the National Treasury as the government seeks to balance revenue collection with social protection. By raising the PAYE exemption threshold, the administration says it wants to leave more money in the hands of workers who are most vulnerable to economic pressures, while stimulating consumer spending across the economy.
In addition to exempting low income earners, the government has also proposed reduced PAYE rates for middle income workers. Salaries above KSh 30,000 but below KSh 50,000 would attract a lower tax rate than is currently applied, further boosting take home pay for a wider segment of the formally employed population.
Treasury officials have indicated that the measures will be anchored in a Tax Laws Amendment Bill, which is set to be tabled in Parliament for debate and approval. Once passed, the changes would be implemented through the Kenya Revenue Authority payroll system, affecting monthly deductions for qualifying workers.
The proposal has been welcomed by many employees and labour groups, who say PAYE has become a heavy burden for low wage earners at a time when essential expenses continue to rise faster than incomes. Supporters of the plan say exempting low income workers from income tax is a practical way to provide relief without complex subsidy programmes.
At the same time, the government has acknowledged that the reforms could lead to a short term reduction in tax revenue. However, officials maintain that increased spending power among workers could offset this through higher consumption, stronger business activity and improved compliance within the tax system.
As Parliament prepares to consider the proposed changes, attention will focus on how quickly the legislation can be passed and whether further adjustments will be made during debate. For millions of Kenyan workers, the plan represents a potentially significant shift in tax policy that could translate into more money at the end of each month and a modest easing of financial pressure.
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