Reducing income tax by 5 per cent can greatly boost the economy

In the 2024/25 financial year, Kenya Revenue Authority collected Sh560 billion from salaried workers through PAYE tax. [Courtesy]

Over the last few months, there has been considerable debate on the impact of tax reliefs for workers. The discussion has largely centered on two perspectives: A fiscal stability standpoint, which emphasises the importance of government revenue and a growth-oriented perspective, which highlights how tax reliefs can boost consumption and stimulate economic expansion.

In Kenya, there has been a steady trend toward scaling up income taxation rather than production taxation, even though the latter is a more sustainable source of revenue. The resulting cumulative tax burden on payslips has not only reduced disposable income but also limited purchasing power, constraining workers’ participation in the economy from both a consumption and a production standpoint.