Bankers, accountants push for lower PAYE rates in Finance Bill 2026 proposals

Stakeholders drawn from various sectors want the government to lower the rates of Pay As You Earn (PAYE).

Making their submissions on the Finance Bill, 2026 before the National Assembly Finance Committee, the Institute of Certified Public Accountants of Kenya (ICPAK) and the Kenya Bankers Association (KBA) took issue with the country’s current tax bands, which they say are steep and unfair.

In presentations made by both the KBA and ICPAK, the groups told the committee that a reduction in the marginal PAYE rate and the expansion of PAYE bands would enhance progressive tax collection in line with the government’s policy objectives.

“By reducing this tax rate to 30 per cent, for example, on the higher tax bracket, you are going to unlock into the economy about Ksh.28 billion. Once that is released back into the economy, it means we can create at least 36,000 new jobs, which is really good for this country," said ICPAK CEO Robert Waruiru.

KBA CEO Raimond Molenje added: "The assurance is that the Ksh.28 billion will be offset within the first year, and what this will result to is the fact that in the second and the third year we will be able to generate much higher taxes, more than the Ksh.31 billion that will be generated in the first year.”

The bankers further argued that a 5 per cent PAYE reduction across all bands would help increase production while expanding the GDP by Ksh.42 billion.

According to KBA, every Ksh.1 billion released into the economy generates at least 1,300 new jobs.

“For every one shilling in loan, picking that number that 50 per cent of employees will access loans with increased disposable income, that comes to Ksh.14 billion. The Ksh.14 billion will be able to unlock loans within our ecosystem to the sum of Ksh.140 billion," Molenje stated.

Besides PAYE issues, Clause 31 of the Finance Bill further proposes to change the VAT status from zero-rated to exempt for inputs or raw materials locally purchased or imported, an issue experts warn could make the manufacture of animal feeds more expensive.

“What are we doing to our food security in the country? Are we saying it’s better for people to import eggs from Uganda, for example, because it’s cheaper to manufacture there? Because if I manufacture these animal feeds, I will not be able to claim the input VAT. I will not claim VAT on transport because of the supplies I am making," said Waruiru.

Stakeholders also raised concerns over the proposal to introduce withholding taxes on card services, terming it retrogressive and inefficient.

They argued that the fees involved are purely transactional and facilitation fees and cannot be considered royalties.

“Let’s not burden transactions, technology or innovation with taxes because that is not good for our economy, it’s not good for financial inclusion and it’s not good for customer experience," Peter Mungai noted.

The provision in the Finance Bill 2026 seeking to empower the Kenya Revenue Authority to use third-party information also continued to raise eyebrows among different stakeholders.

The stakeholders warned that the proposal could trigger unnecessary litigation, calling on the Finance Committee to either clearly define what third-party information can be used or delete the entire clause.