- Banks paid KES38.50 in tax to the government for every KES100 in profit (TTR = 38.50 per cent)
- 8.09%: Proportion of all government tax receipts attributable to banks.
“The KES 194.81 billion TTC comprised KES100.12 billion in taxes borne, direct costs to the banks such as Corporate Tax, and KES94.69 billion in taxes collected on behalf of the government, such as Pay As You Earn (PAYE) and Withholding Tax,’’ the report notes.
Shifting nature of tax burden facing banks in Kenya
A notable trend from the report is the shifting nature of the tax burden. While Corporate Tax remained the single largest component at KES69.41 billion (35.63 per cent of TTC), it declined by 4.98 per cent compared to 2023. This was partly offset by a significant rise in people-related taxes, driven by the full-year implementation of the Affordable Housing Levy (AHL), which saw collections from the banking sector more than double, surging by 113 per cent to KES3.45 billion.
Notably, the report finds that for every KES100 of profit made by the participating banks, KES38.50 was paid to the government as taxes, a measure known as the Total Tax Rate (TTR). The trend represents a decrease from 46.77 per cent recorded in 2023, primarily driven by a steady rise in bank profitability during the period under focus.
“The KES194.81 billion tax contribution by 36 participating banks in 2024 highlights the sector’s central role in Kenya’s revenue mobilization. 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 responsible governance,” said KBA Chief Executive Officer, Raimond Molenje.
“This 8.09 per cent contribution from just 36 taxpayers underscores the banking sector’s important role in Kenya’s tax revenues and highlights the continued reliance on a few highly compliant taxpayers. This data informs the essential dialogue around tax policy 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 the tax compliance environment and accompanying costs in Kenya. Some of the highlights include:
- In 2024, banks employed over three full-time staff for tax compliance, costing about KES13.5 million per bank annually, with additional hires and consultants adding further costs.
- Filing tax returns was rated moderately difficult (3.27/5), with the five-day deadline for Withholding Tax cited as an additional administrative burden.
- The survey participants recommended reverting to monthly Withholding Tax filings and payments to reduce costs and administrative strain.
- There is a clear call for more automation such as the pre-filled returns as part of the VAT compliance, and clearer tax guidelines on aspects such as digital compliance tools such as iTax and eTIMS.
Value to their key stakeholders
The report further examines how banks distribute value to their key stakeholders. In 2024, the government received the largest portion at 54.95 per cent via taxes, followed by employees at 25.62 per cent through salaries and benefits, and shareholders at 19.44 per cent through dividends.
The report notes that banks incur significant administrative costs, with an average of three full-time employees dedicated to tax-related tasks, costing about KES 13.5 million per bank each year. Participants suggested reducing this burden by returning to monthly Withholding Tax filings and increasing automation using platforms such as iTax and eTIMS.
Key: (1USD = KES128)
