Feature: PAYE Pain to Continue: Finance Committee Blocks Tax Relief for Workers

The National Assembly’s Finance Committee has rejected a key amendment in the Finance Bill 2025 that sought to revise Pay As You Earn (PAYE) tax bands, a move intended to ease the financial burden on low and middle-income earners. The committee cited an ongoing review by the National Treasury as the reason for shooting down the proposal, urging the Treasury to expedite the process.

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Proposed Changes Aimed at Fairer Taxation

The rejected amendment had recommended a major overhaul of the current PAYE structure, including:

– Expanding tax bands to 10%, 17.5%, 25%, 27.5%, and 30%

– Raising the minimum taxable income from Sh24,000 to Sh30,000

– Lowering the entry tax rate from 15% to 10% for the lowest earners

– Increasing personal relief from Sh2,400 to Sh3,000 per month

– Adjusting statutory deductions (NHIF, NSSF, housing levy) to boost disposable income

Supporters of the amendment argued that the current tax system is too narrow, applying high rates to low-income earners, which disproportionately affects salaried workers.

“The current bands are too narrow and impose high rates on relatively low-income levels, heavily burdening low and middle-income earners,” the proposal stated.

Why Did the Committee Reject the Amendment?

Despite the push for reform, the Finance Committee declined to approve the changes, stating that Treasury is already reviewing the PAYE structure.

“The committee observed that the National Treasury has expressed intent to review the tax bands and urges them to fast-track this process,” the report read.

The committee emphasized that any changes should be data-driven and strike a balance between government revenue needs and taxpayers’ financial well-being.

World Bank’s Recommendations

The World Bank had also weighed in, proposing:

– A new 15% tax bracket for those earning between Sh24,000 and Sh32,000

– Splitting the 30% tax band into:

– 25% for incomes between Sh32,000 and Sh167,000

– 32.5% for those earning Sh167,000 to Sh500,000

What’s Next?

With the amendment rejected, pressure now shifts to the National Treasury to deliver a revised PAYE structure that addresses inflation, wage growth, and economic fairness.

“The review must ensure a fair and balanced system—one that supports workers while maintaining essential government revenue,” the committee stated.

For now, low and middle-income earners will have to wait as the Treasury finalizes its review. Will the new structure bring relief, or will taxpayers face more of the same?

Source: The Star.

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