Mbadi Proposes Zero Tax for Earners Below Sh30,000 in Bid to Ease Cost of Living

By Brian Kiprono - Reporter

Kenya, February 02, 2026 - Low and middle-income earners are set for tax relief under a new government proposal that seeks to ease the pressure of rising living costs and revive consumer spending.

Treasury Cabinet Secretary John Mbadi has announced plans to abolish income tax for salaried workers earning below Sh30,000 a month, while reducing tax rates for those earning up to Sh50,000. The proposal, he said, is aimed at ensuring more money remains in the hands of workers, stimulating demand across the economy.

Speaking on Sunday during the Budget and Privatisation Public Engagement Forum at Kiambu National Polytechnic, Mbadi said salaried employees have been unfairly burdened by taxation.

“Those salaried Kenyans, we have 3.5 million Kenyans earning a salary. They are carrying the burden on almost everybody. It is not fair. We have decided that I am taking a proposal amendment to Bunge. I am not even waiting for the Finance Bill. Anybody earning below 30,000 in this country should pay zero tax. Zero,” he said.

He added that workers earning slightly higher incomes would also benefit from the changes.

“And anyone earning below 50,000 in this country, we are going to reduce tax. And this is what the government has decided. We have sat down with the President, and we have agreed. We want to give you something in your pocket so that you can spur demand in the economy.”

Mbadi linked the move to a noticeable slowdown in economic activity, attributing it to reduced purchasing power among households.

“Because we have looked at the economy, and we can see the economy choking. Because people don’t have money in their pockets to buy from you. Hakuna mtu ananunua mboga. Badala ya kununua mboga ya sasa hivi mtu anakuja kununua mboga four leaves,” he said.

In the same address, the Treasury CS defended the government’s handling of public finances, arguing that Kenya narrowly avoided a debt default that has hit several African countries.

“In 2021–2022, the IMF predicted that six countries in Africa were going to default on debt repayment. If you fail to pay your debts, it means that it is a failed economy. It is a collapsed economy,” Mbadi said.

He warned that defaulting would have forced Kenya into harsh IMF rescue measures.

“What will happen is IMF will come calling. They will say, fine, we will help you, but on conditions. Number one, you must cut your civil service by 50 per cent. Half of the chiefs go home. Half of the teachers go home,” he explained.

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According to Mbadi, elected leaders would not have been spared either.

“The number of Members of Parliament could have dropped from 290 to 145, while Members of County Assemblies would have reduced from about 1,400 to roughly 700. Salaries, including that of the president, would have been slashed by half,” he said.

He recalled the painful retrenchments experienced during the structural adjustment programmes of the Moi era.

“Remember, there was this structural programme during Mzee Moi’s time. We had not even defaulted, but one of the conditions was retrenchment. Take the staff home. That is what was facing us,” he said.

Mbadi noted that Kenya has so far avoided the fate of most countries flagged by the IMF.

“Five countries out of those six have defaulted. In the neighbourhood here is Ethiopia. The other ones were Ghana, Chad and Mozambique. It is only Kenya which has not defaulted. It is only Kenya,” he added.

Acknowledging public frustration over high prices and job losses, Mbadi urged Kenyans to separate everyday struggles from the broader economic picture.

“I know many of us have been told that this government has done nothing, and we believe it. And there is nothing wrong with believing, because we can’t think the same. If you find two people always agreeing, one of them is not thinking, or both,” he said.

He posed a direct question to business owners: “How would you have done business in an economy that has collapsed?”

Despite public debt standing at over 70 per cent of GDP, the government says Kenya has maintained access to international financial markets through fiscal reforms and IMF-backed programmes, avoiding the currency instability, inflation spikes and debt restructuring seen in countries such as Ghana and Ethiopia following default.