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The banking sector contributed 27 percent of all corporate taxes paid in Kenya in 2019 and 2020, a survey by Pricewaterhouse Coopers (PwC) has revealed.
The report dubbed Total Tax Contribution of the Kenya Banking Sector, nonetheless noted that 2020’s contribution was 24.1 percent compared to the 29.7 percent rate reported in 2019.
It noted that the drop was occasioned by declined profits on account of reduced income due to loan payment holidays granted by banks to customers in the wake of the COVID-19 pandemic.
Speaking during the release of the report, Kenya Bankers Association Chief Executive Officer (CEO) Habil Olaka noted that the increased contribution of taxes is indicative of the high compliance levels of the banking sector.
Olaka said the contribution was achieved despite the 21.2 percent reduction in corporation taxes paid by the sector in 2020 relative to 2019.
“As an industry, we recognize the important role the financial services sector plays in supporting economic growth. In this regard, we remain committed to sustaining efforts towards anchoring business recovery in the face of OVID-19 disruption,” he said.
Overall, there was a 12 percent decline in the banks’ total contribution of all taxes which dropped to Sh224.9 billion.
“This decline is partly attributable to reduced tax rates, specifically reduction of the corporate tax rate from 30 percent to 25 percent, reduction of the top PAYE rate from 30 percent to 25 percent and the reduction of Value Added Tax rate from 16 percent to 14 percent,” the survey noted.
The survey conducted among 32 banks between December 2019 and 2020 further noted that Corporate tax and PAYE are the largest contributors to the total tax filed by the sector accounting for 42.5 percent and 16.5 percent respectively.
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