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Middle class: Kenya’s ‘beasts of burden’ holding the tax system together

Saturday, February 14, 2026

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Reduced worker earnings have depressed demand for goods and services in Kenya.

Photo credit: Shutterstock

By Elvis Ondieki

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Whenever Benedict Mutiso* looks at the section of his payslip showing what the government has deducted from his salary, he sighs.

“Cumulatively, I work for the government for three-and-a-half months every year,” he laments.

He is in what is classified as the middle class, a category with various definitions which circle around someone whose consumption is at least Sh40, 000 a month.

Read: How companies dodge taxes while Wanjiku is overtaxed

The government has been raiding formal workers' salaries to pay for its growing expenditure.

Photo credit: Shutterstock

A sizeable portion of Kenya’s formal workers lies in that category. They are not only the drivers of various industries but also account for a large chunk of the country’s tax collections.

“They are the only remaining missionaries, subsiding the poor,” says Prof XN Iraki of the University of Nairobi’s Department of Management Science and Project Planning. “No question about it; the middle class is the economy’s beast of burden.”

A decade-old classification by the Standard Bank of South Africa says those in the lower middle class have an annual consumption of Sh484,000 to Sh748,000 (Sh40,333-Sh62,333 a month) while the middle class consume Sh748,000 to Sh3.69 million annually. Those who spend above Sh3.69 million a year, it says, are in the upper middle class category.

Prof George Kosimbei, an economics lecturer at Kenyatta University, explains why the middle class bears the brunt of most taxation measures.

“In Kenya, while nominal income tax is progressive, the effective tax burden (considering indirect taxes, evasion, and wealth taxation gaps) often falls heavier on the middle class relative to their ability to pay. The wealthy contribute significantly in absolute terms, but less proportionally, and systemic issues such as informal-sector non-compliance and weak wealth taxation exacerbate this,” he says.

Read: Domestic borrowing is a bitter but necessary pill for Kenya

Overburdening the middle class is not unique to Kenya. Other countries like India have also witnessed the trend. Delhi-based Eve Consultancy wrote in a February 3 post that the scenario is evident in the world’s most populous country.

“The middle class pays consistently, visibly, and without escape routes,” stated the firm, explaining the various ways that middle-income earners get trapped.

“Savings get taxed again when invested or withdrawn,” it wrote, adding that levies like value-added tax also reduce the earnings.

Back in Kenya, one peculiarity about the middle class is that they often make use of private facilities.

“They consume private services which are perceived as better,” says Prof Iraki. “Class consciousness also drives the middle class to buy private services – not necessarily because they have more money.”

Some of Kenya’s middle class are those earning above Sh100, 000, a figure that stood at 387,418 employees in 2023, according to the Kenya National Bureau of Statistics. These accounted for 12.3 percent of the total formal workforce of 3.2 million.

Read: Banks, saccos push for payslip tax cuts amid cash pressure

Workers erecting a sign at NSSF's Social Security House offices in Nairobi.

Photo credit: File | Nation Media Group

From this February, this category of earners is expected to take a worse beating as they will be surrendering more to the National Social Security Fund. This is because the fourth phase of mandatory contributions will come into effect, which will see the deduction per month rise to six percent for each employee, and a similar amount paid by the employer. This will lead to a 12 per cent deduction per salaried worker.

As the working class grapples with shrinking figures at the bottom of their pay slips, economists believe the elites at the top of the chain are feeling less of a pinch, while those at the very bottom fare worse.

“Elites are ‘protected’ from economic pains by savings, better pay and they can adjust the systems to favour them, like pensions and perks. The elites are protected from the cries of the poor by the middle class. That easily makes them heartless. The poor hope to one day become middle class or elite, and hopefully in their lifetime,” says Prof Iraki.

Prof Kosimbei argues that those at the bottom of the economic pyramid also feel the heat when the noose gets tighter on the middle-income earners.

“The poor are disproportionately burdened by indirect taxes, such as VAT, on essentials such as food and fuel that absorb a larger share of their income. Limited access to quality health and education forces reliance on underfunded public services or costly private alternatives. Their focus on survival leaves them without the buffer that helps the middle class manage economic shocks, exposing stark inequality in tax burden and social support,” he says.

Read: Ruto@1,000: How rising levies have eroded workers’ pay slips

The economics lecturer offers a number of solutions to address the scenario where Kenyans in the informal sector almost always stay outside the tax bracket.

“One way is to use technology such as artificial intelligence to monitor transactions based on mobile money. Many of us use M-Pesa everywhere for payment, including the jua kali sector,” he says.

He also advises the Kenya Revenue Authority to base taxes on estimated turnover or fixed amounts agreed between it and informal sector players.

Prof Kosimbei also believes that if specific sub-sectors within the informal sector are targeted, especially the ones that make higher profits, the taxman can collect more.

“They can also incentivise formalisation by enumerating benefits such as access to concessional finance, among others,” he added.

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