Keypoints:
- 1.5 million workers could benefit from tax relief
- PAYE scrapped for earners below KSh30,000 ($235)
- Government shifts strategy after protests
MILLIONS of low-income Kenyans could soon stop paying income tax after the government unveiled plans to shield the poorest workers from the Pay As You Earn (PAYE) system, marking one of the most significant shifts in fiscal policy since President William Ruto took office.
If approved by parliament, the proposal would exempt anyone earning KSh30,000 ($235) or less per month from PAYE entirely, while cutting tax rates for workers just above that threshold – a move officials say is designed to ease the cost-of-living crisis and rebuild public confidence after years of tax-driven unrest.
A pivot in fiscal policy
Treasury Cabinet Secretary John Mbadi announced the plan on Sunday at a public dialogue forum on Kenya’s budget process, saying the Ruto administration would not introduce new taxes in 2025. Speaking at the event, which was widely covered by Kenyan media, Mbadi said the government’s priority had shifted from raising revenue through higher rates to ‘protecting vulnerable households while closing loopholes exploited by high earners and corporations’.
Under the draft proposal, workers earning KSh30,000 ($235) and below would pay zero income tax, allowing them to keep their full salaries. Those earning between KSh30,000 ($235) and KSh50,000 ($392) would see their top marginal rate reduced from 30 percent to 25 percent.
Mbadi described the change as ‘both an economic necessity and a political lesson’, noting that previous attempts to widen the tax net had triggered widespread anger.
Who stands to benefit
Kenya has about three million formal-sector workers, and the Treasury estimates that roughly 1.5 million – about half – could benefit from the tax-free threshold. Relief would extend to employees in both the public and private sectors.
For context, Kenya’s current minimum monthly wage is KSh15,200, equivalent to $117, meaning many of the country’s lowest-paid workers already sit far below the proposed tax-free ceiling. According to the Kenya National Bureau of Statistics, 39.8 percent of Kenya’s 53 million people live in poverty, underlining how politically sensitive income taxation remains.
After the protests
The proposal comes after two turbulent years for Kenya’s tax policy. In 2023 and 2024, Finance Bill measures aimed at raising revenue sparked nationwide demonstrations, led largely by young people, urban workers and informal traders who argued that rising taxes were making basic living costs unbearable.
Several provisions were later withdrawn or revised following sustained street protests, business pressure and political pushback. Mbadi acknowledged this history directly, telling the forum that the government had ‘listened to the people’ and was now recalibrating its approach.
What happens next
The Treasury is expected to table the PAYE amendments in parliament in the coming weeks as part of the broader 2025 budget framework. Lawmakers will debate the fiscal implications, including how the government plans to replace lost revenue.
Economists are divided: some say the move could boost consumer spending and stimulate growth, while others warn that Kenya still faces heavy debt obligations and must broaden its tax base elsewhere.
For now, millions of Kenyan workers are watching closely, hoping that relief promised on paper will soon land in their pay packets.
