In a major fiscal policy shift aimed at easing the escalating cost of living for low-income households, National Treasury Cabinet Secretary John Mbadi has announced a new legislative proposal to exempt individuals earning below Sh32,800 monthly from Pay As You Earn (PAYE) income tax. The proposed amendment, set to be presented to Parliament, responds directly to mounting pressures from trade unions and working-class citizens grappling with high commodity prices, increased energy tariffs, and heavy statutory deductions.
Proposed PAYE Relief
Under the current tax regime, low-income earners are subjected to baseline income tax bands that significantly diminish their disposable monthly earnings. Economic experts note that raising the taxable threshold will immediately boost net take-home pay for millions of formal and informal sector employees.
This injected liquidity is expected to stimulate domestic retail trade and drive local market consumption.
Revenue and Parliamentary Scrutiny
However, financial commentators point out that the National Treasury faces the delicate challenge of balancing this tax relief with revenue collection targets. Exempting low-income brackets from PAYE creates a revenue deficit that must be compensated through enhanced tax compliance enforcement, widened tax nets for high-net-worth individuals, or adjustments to indirect taxes.
Members of the National Assembly’s finance and planning committees have indicated readiness to review the proposals once tabled. Lawmakers emphasize that while tax relief for low-income workers is long overdue, the framework must incorporate robust budgetary adjustments to prevent fiscal deficits.
As Parliament prepares to debate the amendment package, the move marks a pivotal effort by the government to align fiscal policy with the economic realities of ordinary citizens.
Credit: The Star Political & Business Desk (The Star)