Kenya’s low-income workers will have to wait until October for the start of proposed changes to Pay As You Earn (PAYE), after National Treasury Cabinet Secretary John Mbadi announced a new timeline for the review.

The Cabinet Secretary said the process will begin in the first week of October, following a delay from the earlier schedule. He cited a crowded calendar and the need to consult the public before the Government can move forward with amendments to the tax bands.

The proposed reforms are expected to focus on employees earning lower incomes, with Treasury considering changes that could reduce the amount of tax deducted from their monthly salaries.

Public participation to come before bill

Mbadi explained that the Government must complete public participation before presenting the proposed changes, noting that failure to follow the required procedure could lead to legal challenges.

“It is coming. I am going for public participation first,” he said.

He pointed to the possibility of the proposals being challenged in court if the consultation process is not properly conducted. The Government will therefore seek views from stakeholders before finalising the tax adjustments.

The Cabinet Secretary also linked the delay to his planned attendance at the IMF and World Bank meetings. He said he would begin the process in October, attend the meetings and continue with the work upon his return.

The proposed timeline includes public participation by Treasury, followed by the preparation and processing of a Bill for consideration by the National Assembly. Parliament would also conduct its own public participation as part of the legislative process.

Proposed tax bands and KBA recommendations

Under the Treasury proposal, employees earning Sh30,000 or less per month would be exempt from PAYE, while those earning between Sh30,001 and Sh50,000 would benefit from a reduced tax rate.

The proposals are yet to become law, meaning employees will continue to be taxed under the existing PAYE structure until any approved changes take effect.

Meanwhile, the Kenya Bankers Association has presented a separate proposal seeking a five-percentage-point reduction across all PAYE tax bands. The association also wants the highest income tax rate capped at 30 per cent.

KBA estimates that its recommendations could increase workers’ annual disposable income by Ksh 28.1 billion, support the creation of approximately 36,000 jobs each year and raise economic output by Ksh 210 billion.

The recommendations will be considered alongside other views submitted during the public participation process.

As Treasury prepares to begin consultations in October, the final tax structure will depend on the outcome of the review, the legislative process and any amendments approved by Parliament.