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Top earners to get more tax-free per diem in Finance Bill
State spending on domestic and foreign travel has eaten up a huge chunk of ministerial budgets, with offices such as those of the President, his deputy and the prime cabinet secretary topping the charts.
High-income earners who frequently travel for work are poised to get a tax break under the proposed Finance Bill 2025, which seeks to raise the daily tax-free per diem allowance from Sh2,000 to Sh10,000.
The fivefold increase will primarily favour senior government officials and corporate executives, who typically receive higher per diems during local and foreign business trips.
Per diems are daily allowances paid to employees to cover expenses such as meals, accommodation and local transport while on official duty away from their usual place of work.
“Section 5 of the Income Tax Act is amended in item (iii) of the proviso to subsection (2)(a) by deleting the words “two thousand shillings” and substituting thereof the words “ten thousand shillings”,” the Bill reads.
Under the current tax regime, only the first Sh2,000 of such allowances is exempt from tax. The proposed adjustment means that employees receiving up to Sh10,000 per day will not incur any tax liability on these allowances, while those who receive more will only be taxed on the amount exceeding Sh10,000.
This proposal mirrors a similar one in last year’s Finance Bill, which was dropped by President William Ruto following deadly protests against the new revenue-raising proposals contained in the Bill.
Last year’s much-maligned Finance Bill had sought to increase the taxable daily per diem from over Sh2,000 to more than five percent of the employee’s monthly pay.
Per diem, officially known as daily subsistence allowance (DSA), is less pronounced in the private sector than in the public service, where it has been blamed for the rising recurrent expenditure in government.
Senior public officials tend to pocket the highest amounts of DSAs, which is reflected in higher spending on their domestic and foreign travel, as published in reports by the Controller of Budget.
High ranking government officials such as cabinet secretaries can receive per diems of up to Sh194,550 when visiting a country such as Singapore, data from the Salaries and Remuneration Commission (SRC) shows.
State spending on domestic and foreign travel has eaten up a huge chunk of ministerial budgets, with offices such as those of the President, his deputy and the prime cabinet secretary topping the charts.
In the six months to December 2024, the government spent Sh6.5 billion on domestic travel and Sh3.1 billion on foreign travel, most of which is usually spent on per diem allowances.
