This archive report was first published on 17 October 2019.
Kenya's banking sector has made a significant contribution to the country's corporate taxes, with a recent report by PricewaterhouseCoopers (PwC) and the Kenya Bankers Association (KBA) revealing that banks contributed 26% of Kenya's corporate taxes in 2017 and 2018.
According to the report, dubbed 'Total Tax Contribution of the Kenya Banking sector', banks contributed a total of Ksh 207.2 Billion in taxes in the last two years, with Ksh 108.1 Billion in 2017 and KSh 99.0 Billion in 2018.
Despite the significant contribution to government revenue, the banking sector does not receive any tax incentives, unlike other sectors such as manufacturing.
Titus Mukora, a director of Taxes at PwC, noted that banks play a crucial role in tax collection, and the industry's high contribution to corporate taxes can be attributed to the fact that banks do not enjoy corporate tax incentives.
However, the banking sector also faces challenges such as bad debt expenses, due to accounting guidelines in IFRS 9, and misalignment in accounting and tax definitions, which strained the implementation of the tax framework.
The Kenya Bankers Association has called for sustainable tax frameworks that allow the achievement of government objectives and private sector growth.
Speaking at the launch of the report in Nairobi, KBA CEO Habil Olaka emphasized the need for a tax policy informed by data to grow the banking and private sector.
On the other hand, KRA Assistant Commissioner Caxton Masudi argued that banks experience incentives as they do not pay output VAT, and that banks play a significant role in the Kenyan Tax system, such as promoting compliance among other taxpayers.
