The Cabinet Secretary for National Treasury John Mbadi is plotting a series of tax cuts that will provide relief for Kenyans earning Sh50,000 and below. According to the proposals being fronted, the Mbadi tax cuts will give this category of earners cuts of between Sh731 and Sh2,127.
At the same time, the Mbadi tax cuts which shall be implemented under the Tax Laws (Amendment) Bill that is under preparation will increase the threshold of income that is not taxed to Sh30,000 from the current Sh25,000.
Those earning between Sh30,000 and Sh50,000 shall also benefit from lower taxation of 25 percent from the current rates that range between 30 percent and 35 percent.
“Anybody earning Sh30,000 and below in Kenya should not pay PAYE (Pay As You Earn). They should pay zero,” said CS Mbadi. “We are reducing the tax rate by 5 percent to 25 percent. We are trying to put some money in your pockets.”
According to the National Exchequer, currently, there are about 3,650,165 salaried Kenyans who are earning Sh30,000 and below while 1.36 million Kenyans are estimated to earn Sh50,000 and below.
Currently, the PAYE tax threshold is set at Sh24,000. These changes mean that a Kenyan who is earning Sh30,000 will take home an extra Sh731.25. Their net pay after statutory deductions will increase to around Sh26,925.
Those earning Sh35,000 will get an increase of Sh1,500 to take home Sh31,059.38. They have been paying Sh1,853.13 in PAYE and this will now reduce to Sh353.13.
Kenyans earning Sh50,000 will take home an extra Sh2,127.10. Their take home will come to around Sh41,156 per month after statutory deductions.
This comes as the World Bank pushes Kenya to exempt workers who earn less than Sh32,333 per month from paying the controversial housing tax and the Social Health Insurance fund (SHIF) to the Social Health Authority (SHA).
At the same time, the World Bank wants taxes for Kenyans earning Sh800,000 per month and above raised. Monthly salaries of between Sh32,334 and Sh166,667 would be taxed at a rate of 25 percent while the rate for Kenyans earning between Sh24,000 and Sh32,333 would be lowered to 15 percent from the current 25 percent.
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