Mbadi: Why state dropped plan to scrap PAYE for Kenyans earning below Sh30,000

Treasury  CS John Mbadi 

Treasury Cabinet Secretary John Mbadi has explained why the state reneged on the proposal to abolish Pay As You Earn (PAYE) tax for individuals earning below Sh30,000.

Mbadi says effecting the move could have deprived the taxman close to Sh30 billion, adding that the relief can only be implemented in the future if other sources suffice to bridge the gap.  

He cited personal income tax and rental income tax as some areas where the Treasury is seeking to restructure to raise more revenue, which would then pave the way for lower PAYE.

"If the reforms bear fruit, we will collect much more from personal income tax, which will compensate for this. The other area is the rental income tax. Those are the things we are working on, but that will not stop us from implementing or actualising the proposal that we announced publicly,” he said on Monday.

During a briefing session at his Treasury offices, Mbadi told the country that the government is forced to heavily tax low-income earners because of rampant tax evasion by high-income-earning individuals.

The CS said, consequently, the Kenya Revenue Authority (KRA) was seeking access to Kenyans' financial data to clamp down on billionaires underpaying or deliberately evading taxes.

"We would have even reduced PAYE so that people pay less, but because we have people who earn money but do not want to pay taxes, taxpayers bear a lot of the burden," Mbadi said during a briefing on the 2026 Finance Bill.

The Treasury boss sought to rally Kenyans to support the move by KRA to access personal data for the purposes of calculating estimated income that is liable for taxation.

The Treasury boss insisted that financial data is part of public records and that KRA should be allowed access to it.

He used the occasion to assure the public that such information as mobile money (Mpesa and others) will not be used to determine income, but gauge transactions on wallets that may pass as income for purposes of levying taxes.

"M-Pesa is not an income; it is a transfer of funds. Nobody will come for that," the CS said while accusing those opposed to access to financial data of engaging in money laundering activities, hence they don’t want accountability.

Mbadi added, "If I have a bank account which has huge transactions that cannot be explained, can I pay taxes on it at the very least? KRA should get the data and ask me if it is my income. It is for me to explain, for example, that the money has been sent to me by my aunt, boyfriend, or girlfriend, and it is not income.”