How Much PAYE You Could Pay Under Eliud Owalo’s Tax Proposal
Presidential hopeful and former Deputy Chief of Staff Eliud Owalo has unveiled plans for major tax reforms that could transform the way Kenyans pay taxes.
Central to his proposals are cuts in income tax and value-added tax (VAT), which he says are necessary to increase take-home pay, boost household spending, and encourage economic growth.
Owalo proposes reducing income tax to 20 per cent and VAT to 10 per cent, arguing that Kenya’s current tax system is heavy on workers and businesses alike, leaving many with little disposable income.
Owalo criticized the current Pay-As-You-Earn (PAYE) system as being harsh on salaried employees and businesses.
He noted that high taxation is squeezing household budgets while costs of living continue to rise, which discourages productivity and investment. According to him, these taxes prevent the economy from reaching its full potential.
Speaking during an interview on NTV on Wednesday, Owalo emphasized that tax reform would be the first priority of his economic agenda if he becomes president.
He also promised to drastically reduce the current housing levy, which now stands at rates between 2.5 and 0.5 per cent.
“The first area I am focusing on is taxation,” Owalo explained. “I want to lower income tax from 35 per cent to 20 per cent, reduce VAT from 16 to 10 per cent, cut the housing levy from 2.5 to 0.5 per cent, and completely remove digital taxes, especially on digital devices. My ultimate goal is to transform Kenya into a fully functional digital economy.”
He further criticized the frequent changes in tax policies, stating that they create uncertainty for both workers and investors. Owalo stressed the need for predictable and stable tax rules to enable long-term planning and growth.
He added that his administration would remove what he called punitive and business-unfriendly taxes, aiming to make the system fairer for everyone.
Under Owalo’s proposed tax structure, a worker earning a gross salary of Ksh50,000 would pay a flat income tax of about Ksh10,000 at the 20 per cent rate.
This is considerably lower than the current PAYE deductions under the graduated system, which, combined with other statutory levies, leave employees with less take-home pay.
For someone earning Ksh100,000, the proposed flat tax would amount to roughly Ksh20,000. Owalo points out that reducing the top PAYE rate from the current 35 per cent would give employees a significant boost in net income, even before factoring in cuts to other deductions such as the housing levy.
The intended effect of these lower tax rates is to encourage more people to comply with the law, making taxation more affordable while boosting household consumption and savings, which in turn could stimulate the broader economy.
Owalo’s plan also includes a major reduction in the housing levy. Currently, employees pay 2.5 per cent of their gross income, which he proposes cutting to just 0.5 per cent.
For example, someone earning Ksh50,000 would see their monthly housing levy drop to about Ksh250 from the current Ksh1,250.
For those earning Ksh100,000, the deduction would fall to roughly Ksh500 from Ksh2,500. This change aims to keep the levy in place as a minimal contribution rather than a heavy financial burden.
In addition to these tax reforms, Owalo pledged to stop relying on government borrowing to meet revenue needs. His vision is to achieve a zero budget deficit while broadening the tax base.
Currently, only 8 to 9 million Kenyans pay taxes out of a potential 35 million taxpayers, which means a small portion of earners bears most of the tax burden.
It’s worth noting that proposals to reduce PAYE are not new. Last December, the Kenya Bankers Association (KBA) suggested changes to the PAYE bands, including raising the minimum taxable income from Ksh24,000 to Ksh30,000 and lowering the top rate to 30 per cent.
Under KBA’s proposal, income below Ksh30,000 would be exempt, earnings from Ksh30,001 to Ksh50,000 would be taxed at 15 per cent, salaries between Ksh50,001 and Ksh100,000 would face a 20 per cent rate, incomes from Ksh100,001 to Ksh400,000 would pay 25 per cent, and anything above Ksh400,000 would be taxed at 30 per cent.
Owalo’s plan goes further by proposing even lower rates and simplified deductions, aiming to make taxation fairer, more predictable, and less burdensome.
If implemented, these changes could give Kenyan workers more take-home pay, reduce financial stress on households, and encourage a more vibrant, investment-friendly economy.
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