The amount of Tax that banks paid to the government grew to Sh181.27 billion in 2022, a new report by PwC Kenya in partnership with the Kenya Bankers Association (KBA) shows.
The report dubbed Total Tax Contribution (TTC) of the Kenya Banking Sector 2022 indicates that this is a 39.94 percent increase from the Total Tax Contribution of Sh129.52 billion made in 2021.
The impressive performance was realized amid a challenging business environment emanating from increased inflation, prolonged drought, depreciation of Kenya Shillings against major currencies, geopolitical pressure, and election-related uncertainties.
The total tax contribution includes taxes borne by the banks, such as corporate tax as well as taxes that banks collect from customers and paid to the government. The 39 participating banks reported taxes borne of Sh103.28 billion and taxes collected of Sh77.99 billion.
”This is a tremendous contribution given that it is made up of 39 banks against approximately 6.4 million active taxpayers in the country. The growth of the TTC of the study participants of 39.94 percent is significantly higher than the growth in total government revenues of 6.90 percent. This indicates that the growth in taxes was more concentrated within the banking sector compared to other sectors,’’ reads the report.
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The increase in Total Tax Contribution is primarily attributed to an increase in Corporate Tax and Excise duty which grew by 77.26 percent and 60.13 percent, respectively.
The growth in Corporate tax to Sh87.7 billion in 2022 was supported by a growth in balance of tax (a form of corporate tax) paid in 2022 and an increase in 2022 installment taxes.
In addition, the sharp increase in excise duty collections was attributed to an increase in non-funded income (including fees and commissions) and an increase in the volume and value of digital transactions.
Other factors at play include the introduction of Excise duty on fees and commission on loans by the Finance Act 2021 which effected 1 July 2021.
The report further noted that the banking sector contributed 35.92 percent of total corporate taxes received by the State from all the sectors in the country compared to 25.57 percent in 2021.
Corporate tax paid by Kenyan banks increased 94.38 percent to 98.55 billion from Sh49.48 billion in 2021. During the review period, withholding tax collected by the banking sector increased to Sh37.31 billion while Pay As You Earn contribution increased to Sh37.23 billion.
Kenya Bankers Association’s Chief Executive Officer Habil Olaka notes that the financial services sector plays an important role in supporting economic growth.
”As an industry, we commit to continue working together with all stakeholders towards driving sustainable economic growth and contributing positively to the national socio-economic development agenda,” said Olaka.
