In a bold move that highlights tensions between political priorities and fiscal caution, President William Ruto has overruled Treasury concerns to implement sweeping tax relief for low-income Kenyan workers—despite warnings of a Sh40 billion budget shortfall.
The decision, announced at the National Prayer Breakfast, came after Treasury Cabinet Secretary John Mbadi expressed reservations about the PAYE exemption proposal. Mbadi had stated the relief wasn’t included in the Finance Bill 2026 because the government was still running simulations to assess economic impacts.
“The Treasury came back and said, ‘Oh, Mr. President, you know this is going to be very big. You know it’s going to cost us Sh40 billion in this budget,’” Ruto recounted. “I told them, ‘Let’s do it. Let’s do it.’”
The relief exempts workers earning up to Sh30,000 monthly from PAYE tax, eliminating the current 10% rate paid by those earning up to Sh24,000. This represents a significant policy victory for Kenya’s working class, who have faced mounting economic pressures.
However, the Sh40 billion revenue gap raises serious questions about budget sustainability. Mbadi had explained that the government wanted to widen the personal income tax base to offset losses, but specific mechanisms remain unclear. Critics worry about potential cuts to essential services or increased borrowing to fill the gap.
The President’s willingness to override Treasury advice reflects the political calculus ahead of the 2027 General Election. With opposition figures criticizing his economic management, Ruto appears determined to deliver tangible relief to voters, even at fiscal cost.
The move also includes lowering the 30% tax bracket to 25% for middle-income earners, broadening the relief’s political appeal. Projections suggest workers will see net pay gains between Sh731 and over Sh2,000 monthly.
Whether this gamble pays off politically—and how the government manages the budget impact—will be closely watched in coming months.
Full coverage: https://nairobiwire.com/2026/05/ruto-paye-tax-relief-low-income-earners-sh30000-kenya-2026.html