Stakeholders have piled pressure on the National Assembly to raise the tax-free income threshold to Ksh30,000 and overhaul the Pay-As-You-Earn (PAYE) structure under the Finance Bill, 2026.
Financial and tax advisory firms appearing before the Departmental Committee on Finance and National Planning on May 22 urged Parliament to review existing tax bands, arguing that the current structure has placed an unsustainable burden on salaried workers amid rising statutory deductions.
Among the proposals, audit firm Ernst & Young LLP called for reducing the top individual tax rate from 35 percent to 30 percent, alongside a 5 percent reduction across all PAYE bands.
The firm also recommended increasing monthly personal relief to Ksh3,000 from Ksh2,400 and introducing a tax-free threshold of Ksh30,000.
“The cumulative effect of increased taxes and statutory deductions has significantly reduced disposable income and purchasing power. The current structure results in individuals being taxed at rates higher than corporates (35 percent vs 30 percent), creating inequity and disadvantaging those in formal employment,” EY LLP representatives told the Committee.
MPs Pressed to Consider Ksh30,000 Tax-Free Threshold in Finance Bill
EY LLP argued that the cumulative effect of taxation and deductions has significantly reduced disposable income, warning that the current system places employees at a disadvantage compared to corporate taxpayers.
The Departmental Committee acknowledged the proposals but urged stakeholders to provide a detailed fiscal analysis showing the net revenue impact of the suggested reforms.
MPs stressed the need to balance tax relief measures with sustainable revenue generation, noting that any reductions would require alternative financing strategies.
Also Read: How New Tax Proposals in Finance Bill 2026 Will Affect Mitumba and Smartphones
Parliament Weighs Calls to Ease PAYE Burden on Salaried Workers
Stakeholders also raised concerns to MPs about Clause 16 of the Bill, which proposes granting the Commissioner General of the Kenya Revenue Authority the power to compel companies to distribute at least 60 percent of their distributable profits as dividends.
Tax advisory firms, including Andersen Kenya, Alpha Tax and Business Advisory Services, and Ichiban Tax and Business Advisory, warned that the proposal could weaken corporate reinvestment capacity, destabilize business operations, and reduce long-term economic growth.
Further concerns were raised over proposed changes to corporate tax filing timelines, which would reduce the submission period from six months to four months after the end of a financial year, with even shorter deadlines for nil returns.
Stakeholders cautioned that the changes could increase compliance costs and lead to errors due to rushed reporting.
Also Read: Treasury Explains Proposed Change in Deadlines for Filing KRA Returns Under Finance Bill 2026
Kenya Bankers Association Call for PAYE Cut
Earlier, the Kenya Bankers Association (KBA) proposed a uniform five per cent reduction in Pay-As-You-Earn (PAYE) across all income bands.
KBA said the reduction could release more than KSh28.1 billion into the economy annually, potentially supporting over 36,000 jobs.
The bankers further estimated that the policy shift would unlock at least KSh140 billion in formal lending capacity, boosting credit flow to businesses and households.
They also projected that the resulting economic expansion could generate between KSh27.1 billion and KSh31.5 billion in additional revenues, helping to offset initial revenue losses from the PAYE cut.
