Kenya Faces Tough Choice Over Proposed Tax Cuts

Kenya’s National Treasury faces a major challenge as the government plans to reduce taxes for workers and other Kenyans while dealing with a budget deficit of about Sh1.2 trillion.

The proposed tax cuts are meant to ease the cost of living and leave households with more money to spend. However, the changes could reduce government revenue at a time when the State needs money to pay for public services and meet its financial obligations.

According to Daily Nation on October 26, 2026, the government plans to present the Tax Laws (Amendment) Bill, 2026, to Parliament next week, subject to Cabinet approval. The Bill will put into law tax relief measures announced by President William Ruto during his Mashujaa Day speech.

One of the main proposals is to exempt workers earning Sh32,333 or less per month from Pay As You Earn (PAYE) tax. The government also wants to remove stamp duty on property transactions worth Sh1 million or less and scrap the 25 per cent import duty on mobile phones.

These measures could help low-income earners, small property buyers and consumers who struggle with high prices.

However, tax reductions could leave the Treasury with less money to fund government activities. Earlier estimates showed that changes to PAYE could cost the government more than Sh35 billion every year.

To reduce the expected loss, the Treasury is considering removing personal tax relief and reviewing some tax exemptions. This could mean that workers earning more may lose some of the tax benefits they currently receive.

The challenge comes as Kenya continues to rely on borrowing to meet its spending needs. In August, Business Daily Africa reported that the Treasury expected the 2026/27 budget deficit to widen to Sh1.288 trillion, partly due to lower revenue expectations and higher interest payments on domestic debt.

The government must therefore find a way to support struggling households without creating a bigger hole in public finances. The proposals will also need parliamentary approval and public participation before they become law.

As discussions continue, the key question is whether the government can lower the tax burden on Kenyans while collecting enough money to run the country and pay its debts.

Source: https://www.facebook.com/share/p/1Cg23ccFjB/

TrendPulseKe feedback-opera-news-app@opera.com