Kenya to scrap tax for low-income earners

Millions of low-income Kenyans could soon be happy as the government plans to exempt them from payment of tax aimed at stabilising their finances.

Kenya’s finance minister, who is referred to as Treasury Cabinet Secretary, John Mbadi, told a public dialogue forum on budget processes on Sunday, 1 February, that the administration of President William Ruto does not plan to introduce new taxes.

He said, instead, its focus is on reducing the tax burden on low-income earners while tightening enforcement of those who are making big money in business but not paying taxes.

Mbadi said a proposal will be sent to the parliament, and if approved, anybody earning Sh30,000 and below per month will be exempted from the Pay As You Earn tax.

Meaning, all their income will go straight into their pockets untouched. Sh30,000 is equivalent to $235.

Benefactors

Those earning between Sh30,000 and Sh50,000 will see their tax rate cut from 30% to 25%.

Mbadi said Kenya has about three million workers and that roughly 1.5 million of them are potential beneficiaries of the proposed tax-free policy. Workers in the private sector are also expected to enjoy the relief.

To put this in context, Kenya’s current minimum wage is Sh15,200 per month, the equivalent of $117. According to the Kenya National Bureau of Statistics, the country, with a population of about 53 million, has a poverty rate of 39.8%.

The tax review proposal comes against a backdrop of growing public complaints over taxation.

In 2023 and 2024, proposed tax increases under the Finance Bill sparked nationwide protests, led largely by young people and urban workers who said rising taxes were making life unbearable. Those proposals were later revised.

Mbadi said the current proposal reflects lessons learned from the public backlash and pressure to protect low-income earners.

Kenyans are now anxiously waiting to see its approval by the country’s parliament and evaluate its implementation.