Mbadi defends tax policy, dismisses over-taxation claims as misleading

National Treasury and Planning Cabinet Secretary John Mbadi has strongly defended the government’s tax policies, dismissing claims of over-taxation as misleading.

Speaking during the National Assembly Mid-Term Retreat in Naivasha on Friday, Mbadi, an ODM expert appointed by President William Ruto, argued that the current tax regime is not as burdensome as critics suggest, particularly for middle-income earners.

In a detailed presentation on the state of the economy to MPs, he broke down the tax implications for individuals earning Ksh 60,000 per month, a salary bracket often associated with Kenya’s middle class.

He clarified that the introduction of the Housing Levy and the Social Health Insurance Fund (SHA) has been misrepresented as excessive taxation.

“If you are earning Ksh 60,000, the additional deductions you pay include the Housing Levy at 1.5 per cent and SHA at 2.75 per cent. Combined, this amounts to 4.25 per cent, which is Ksh 2,550,” Mbadi stated.

He further noted that without these deductions, individuals would have surrendered 30 per cent of their income to other taxes.

However, with the new amendments, the 30 per cent remains unchanged, and the net effect of the changes is an additional Ksh 1,785 in deductions after factoring in the removal of previous National Hospital Insurance Fund (NHIF) contributions.

Mbadi compared the new structure to the past NHIF rates, where someone earning Ksh 60,000 previously contributed Ksh 1,700 monthly. “When you subtract that from the Ksh 1,785, the actual additional deduction is only Ksh 85. Is that over-taxation?” he posed.

His remarks come amid rising public discontent over the increased cost of living and additional salary deductions. Critics accuse the Ruto administration of overburdening citizens with multiple levies, including the controversial Housing Levy and SHA, introduced through the 2023 Finance Act.

However, Mbadi insisted that the narrative of over-taxation has been exaggerated and urged Kenyans to assess the numbers objectively.

“Those of us in government will now expose this narrative so that people can understand that it is not as bad as it is being portrayed,” he said.

His defence of the tax regime aligns with the government’s push to fund its ambitious development agenda, including affordable housing and universal healthcare.

Nonetheless, the opposition and some economists argue that the cumulative effect of these levies, combined with rising inflation, is straining disposable incomes and slowing economic growth.