A plan to relieve the tax burden on salaried workers has been shelved after the Kenya Revenue Authority failed to meet its revised revenue target by a margin of Sh130 billion, Treasury Cabinet Secretary John Mbadi told the Senate.

Appearing before a plenary session, Mbadi disclosed that the government had considered lowering the Pay As You Earn (PAYE) deductions to cushion households and stimulate spending.

However, the taxman’s revenue miss forced a rethink.

“We did some simulations on how to reduce the Pay As You Earn (PAYE),” he told lawmakers.

“What stopped us from implementing it in this finance bill was the failure by KRA to meet its revenue targets.”

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KRA’s revised target for the financial year ending 30 June 2024 stood at Sh2.537 trillion, already a downward adjustment from the initial projection of Sh2.787 trillion.

Despite the lower bar, actual collections amounted to Sh2.407 trillion, translating to 95.5 per cent performance and leaving a Sh130 billion gap.

Even so, compared to the previous year’s total of Sh2.166 trillion, the tax haul still marked an 11.1 per cent year-on-year improvement.

The Treasury has blamed the shortfall on a mix of economic setbacks, citing the weakening of the local currency, tight credit conditions in the banking sector, and disruptions in international trade caused by persistent global conflicts.

Although the much-anticipated tax relief is now on hold, Mbadi signalled that it remains on the cards, just not yet.

He pointed to reforms underway at KRA, especially efforts to upgrade systems and expand automation, as critical steps toward enabling such policy changes in the future.

“The relief will be incorporated in the next finance bill,” he assured.

For many Kenyans facing tightening household budgets, the delay in PAYE relief may feel like another blow, but the Treasury appears intent on stabilising public finances before offering any tax breaks.