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Mbadi to review PAYE tax to ease workers’ financial burden

Teresiah Ngio by Teresiah Ngio
December 6, 2024
in News
Reading Time: 1 min read

Treasury Cabinet Secretary, John Mbadi, has revealed plans to review the Pay-As-You-Earn (PAYE) tax system, aiming to alleviate the financial burden on Kenyan workers. Speaking at the launch of the 2024 FinAcess Survey, Mbadi acknowledged that high salary taxes remain a significant challenge for employees. Currently, 8% of workers’ salaries go towards taxes, a situation he believes needs addressing.

“We have listened to the public. Despite inflation dropping to a 17-year low, the shilling strengthening against major currencies, and the economy growing above the Sub-Saharan Africa average, people still say they have no money,” Mbadi explained, underscoring the necessity of tax relief for workers.

Mbadi attributed the high taxes to a substantial budget deficit, which initially exceeded Kes.900 billion, requiring the government to focus on increasing domestic revenue and reducing reliance on debt. However, he noted that recent measures have reduced the deficit to Kes.780 billion, with expectations to further decrease it to below Kes.760 billion in the next financial year.

“As the deficit decreases, the benefits will be passed on to employees,” Mbadi added, assuring the public that tax relief will follow a reduction in the budget deficit.

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In addition to taxes, the Treasury CS highlighted the challenge of high bank lending rates, which have hindered access to credit, especially for small businesses. He urged financial institutions to lower lending rates to support economic growth and ease the burden on businesses. “I thank the CBK governor for the ongoing talks with the banks. Changes in lending rates directly affect businesses,” he said.

While the base lending rate has recently decreased to 12%, Mbadi expressed hope for further reductions after the Central Bank of Kenya’s Monetary Policy Committee meeting on December 5, 2024.

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