- Banks paid KES38.50 in tax to the government for every KES100 in profit (TTR = 38.50 percent)
- 8.09%: share of all government tax revenue attributable to banks.
“The TTC of KES 194.81 billion included KES 100.12 billion in taxes, direct costs to the banks, such as corporate income tax, and KES 94.69 billion in taxes collected on behalf of the government, such as Pay As You Earn (PAYE) and withholding tax,” the report said.
Changing nature of tax burden faced by banks in Kenya
A striking trend from the report is the shifting nature of the tax burden. While corporate tax remained the largest component at KES 69.41 billion (35.63 percent of TTC), it decreased by 4.98 percent compared to 2023. This was partially offset by a significant increase in people-related taxes, driven by the full-year implementation of the Affordable Housing Levy (AHL), which boosted banking sector collections then doubled and increased by 113 percent to KES 3.45 billion.
Notably, the report shows that for every KES 100 in profit made by the participating banks, KES 38.50 was paid to the government as tax, a measure known as the Total Tax Rate (TTR). The trend represents a decline from 46.77 percent in 2023, mainly due to a steady increase in bank profitability during the period under review.
“The tax contribution of KES 194.81 billion by 36 participating banks in 2024 highlights the sector’s central role in revenue mobilization in Kenya. This data provides valuable insights for policymakers as they consider how to balance fiscal sustainability with sector resilience. The banks’ voluntary participation also reflects a strong commitment to transparency and accountability board,” said Raimond, Chief Executive Officer of KBA. Mill.
“This 8.09 percent contribution from just 36 taxpayers underlines the important role of the banking sector in Kenya’s tax revenues and highlights its continued dependence on a few highly compliant taxpayers. This data sets the stage for the vital tax policy dialogue needed to ensure the sector remains robust,” said Peter Ngahu, PwC Country and Regional Senior Partner, Eastern Africa.
Complexity and costs of tax compliance
As part of the study, the researchers sought to understand the level of complexity of tax legislation and associated costs in Kenya. Some highlights include:
- By 2024, banks employed more than three full-time tax compliance staff, costing approximately KES 13.5 million annually per bank, while additional recruitment and consultants drove up costs even further.
- Filing tax returns was rated as moderately difficult (3.27/5), with the five-day withholding tax deadline cited as an additional administrative burden.
- Survey participants recommended returning to monthly withholding tax returns and payments to reduce costs and administrative burden.
- There is a clear call for more automation, such as pre-completed returns as part of VAT compliance, and clearer tax guidelines on, for example, digital compliance tools such as iTax and eTIMS.
Value for their key stakeholders
The report further examines how banks distribute value among their key stakeholders. In 2024, the government received the largest share at 54.95 percent through taxes, followed by employees at 25.62 percent through salaries and benefits, and shareholders at 19.44 percent through dividends.
The report notes that banks incur significant administrative costs, with an average of three full-time employees dealing with tax-related tasks, costing approximately KES 13.5 million per bank annually. Participants suggested reducing this burden by returning to monthly withholding tax returns and increasing automation using platforms such as iTax and eTIMS.
Key: (1USD = KES128)
#Banks #Kenya #paid #billion #taxes