This archive report was first published on 16 October 2019.
Commercial banks in Kenya are facing a significant tax burden, with the Kenya Revenue Authority (KRA) owing them an estimated Ksh.13.3 billion in irrecoverable taxes, according to a report by PwC covering the 2017 and 2018 financial years.
The report highlights the disproportionate tax levies on the banking sector, with irrecoverable taxes amounting to 10.5 percent and 14.1 percent of total tax dues in 2017 and 2018, respectively.
Kenya Bankers Association (KBA) Chief Executive Officer Habil Olaka emphasized the need for a comprehensive banking industry tax policy, stating, 'The financial services sector thrives in predictability. We would seek for the development of a comprehensive banking industry tax policy that would seek to address some of the sticky issues around taxation while taking a long-term view on the industry.'
Of the Ksh.62 billion and Ksh.48.4 billion of taxes borne by banks in 2017 and 2018, irrecoverable taxes were only second to corporation tax.
According to PwC Tax Partner Titus Mukora, the current taxation regime is hindering the growth prospects of the banking sector, saying, 'If we are trying to set ourselves up as a financial hub like London or New-York then we are very far from it at the moment.'
Kenya's commercial banking sector corporation tax charge alone sits above that of jurisdictions such as Frankfurt and Singapore, reflecting the less competitive domestic scene for cross-border investments.
