Push to cut PAYE: Private sector wants 30 per cent tax cap to boost incomes
National
By
Mwangi Maina
| Apr 25, 2026
The Kenya Private Sector Alliance has formally petitioned Parliament to cap the highest Pay As You Earn (PAYE) tax band at 30 per cent, down from the current 35 per cent, in a bid to ease pressure on Kenyan workers’ shrinking incomes.
In a high-level meeting with the National Assembly Departmental Committee on Finance and National Planning, the private sector presented proposals for the Finance Bill 2026 aimed at addressing what it termed a “triple crisis” of fiscal strain, energy constraints, and regulatory instability.
The proposal to lower the PAYE ceiling is being positioned as a major economic stimulus. Kennedy Mutisya told lawmakers that reducing the top rate to 30 per cent, alongside increasing personal relief to Sh3,000, would create a Sh30,000 tax-free threshold for low-income earners.
Industry estimates suggest the move could inject Sh28.1 billion into workers’ pockets, potentially boosting consumer spending, increasing GDP by Sh42 billion, and creating approximately 36,000 jobs.
Beyond personal income tax,,KEPSA Director James Mwangi warned that the 2026 fiscal outlook remains under strain, with debt servicing consuming 53 per cent of national revenue and pending bills standing at Sh664.8 billion
To support economic recovery, the alliance is pushing for the reinstatement of a 15 per cent preferential corporate tax rate for local motor vehicle assemblers and large-scale housing developers. It also proposed extending the carry-forward period for tax losses from five to ten years to support capital-intensive industries.
To ease liquidity pressures on businesses,KEPSA further recommended amending the Income Tax Act to allow withholding VAT to be remitted by the 5th of the following month, instead of the current five-day requirement.
The alliance also called for zero-rating key agricultural inputs such as biofertilisers and soil products to enhance food security and align with the Nairobi Declaration on Africa Fertiliser and Soil Health.
Finance Committee member Ariko John Namoit acknowledged that recent tax measures have increased the cost of doing business and compliance burdens. He assured stakeholders that the Finance Bill 2026 would be handled as a comprehensive economic strategy aimed at balancing revenue collection with a supportive business environment.