Kenya’s bankers have abandoned their usual conservative stance to sound a deafening alarm. The Kenya Bankers Association (KBA) is forcefully lobbying the Treasury for a universal 5% cut in Pay As You Earn (PAYE) taxes, warning that the Kenyan worker has been squeezed to the breaking point.

This proposal is not merely about tax relief; it is a desperate attempt to resuscitate a suffocating economy. With the cost of living skyrocketing and disposable incomes shrinking, the KBA argues that the consumer engine of the economy is stalling. The logic is simple: if you don’t leave money in people’s pockets, they can’t buy goods, they can’t service loans, and the entire financial ecosystem begins to rot from the bottom up.

The Mathematics of Survival

The KBA’s proposal goes beyond the government's populist move to zero-rate tax for low earners. They are demanding a structural overhaul: a 5% reduction across all tax bands and a hard cap of 30% on the highest rate. This challenges the Treasury’s current trajectory of aggressive taxation to service debt. KBA CEO Raimond Molenje is effectively arguing that the Laffer Curve has inverted—taxing more is now yielding less economic activity.

The timing is critical. With NSSF contributions set to hit 6% by February 2027, the "take-home" pay of the average salaried Kenyan is facing a double assault. The bankers see the loan books deteriorating as households prioritize food over debt repayment, a trend that could trigger a banking crisis if left unchecked.

• The Sh28bn Injection: Analysts estimate this cut would release approximately Sh28 billion back into the economy annually. This liquidity is seen as vital stimulus for the retail and manufacturing sectors, which have reported slumped sales for three consecutive quarters.
• The Corporate Parity: The demand to cap the top PAYE rate at 30% aligns personal tax with corporate tax, removing the penalty on success that drives talent brain drain. Currently, high earners are taxed more heavily than the corporations they run.

A Showdown at the Treasury

The ball is now in Cabinet Secretary John Mbadi’s court. The Treasury is desperate for revenue to meet IMF benchmarks, making a tax cut a tough political sell. However, the bankers' argument is that without this relief, the tax base itself will shrink as businesses close and consumption collapses.

This is a battle for the economic soul of the nation. Is the priority to balance the books today by bleeding the taxpayer dry, or to stimulate growth for tomorrow? The bankers have cast their vote; now the government must decide if it can afford to ignore the people who manage the country’s money.