Banking sector tax contribution hits 5-year high in 2021

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NAIROBI, Kenya, August 3 – Kenya’s banking sector has recorded the highest tax contribution in five years, according to a new survey.

The survey which was prepared by Price Waterhouse Coopers Limited in conjunction with the Kenya Bankers Association noted that banks paid a total of 129.52 billion shillings to KRA in 2021, an increase of 24% from 104 .8 billion shillings in 2020.

Speaking at the launch of the study, KBA boss Habil Olaka praised the industry for the great efforts it had made in raising more than the full tax contribution amount it had collected from previous years.

The 2021 contribution was 6.82% of total tax revenue in Kenya, up from 6.9% in 2020.

Alice Muriithi, Associate Director at PwC Kenya, highlighted the need to rethink the banking sector to ensure it effectively fulfills its role of extending credit to other sectors.

According to the findings, banks paid 50.69 billion shillings in corporate taxes, or 26% of corporate taxes collected in the country in 2021, an increase of 24% from 41.28 billion. shillings collected in 2020.

The improvement was attributed to an increase in banks’ profit before tax and also to an increase in economic activities in the country.

The banking sector also recorded a 58% year-on-year increase in excise duties, the largest year-on-year growth found by the study.

The significant growth was attributed to the economic recovery in the country which was seen after the reopening of the economy.

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However, the sector saw a 16.20% drop in sunk value added tax, which was caused by increased use of digital banking services.

This is the only sector that saw a decline from the year 2020 as banks were forced to close some of their branches and ATMs as people no longer relied on physical banking services.

“This is the only tax category analyzed in this report that showed a reduction in 2021 compared to 2020, thus pointing to a sector reaping the benefits of investments in digitalization,” Muriithi noted.

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