Tax contribution to GDP by banks dip on toxic excise regime

Taxes collected by Kenyan commercial banks stood at Sh53.6 Billion and Sh46.6 Billion in 2019 and 2020 respectively – a 13.1 percent year on year decline, according to the Total Tax Contribution of Kenya Banking Sector report.

That drop was attributed to the 42 percent decline in excise duty from Sh 16.1 Billion in 2019 to Sh9.27 Billion in 2019 on government directives to help cushion workers from the adverse impact of the Coronavirus pandemic.

“This is as a result of reduction in fees and commissions income by the banks in compliance with a Central Bank of Kenya directive to waive these fees in order to promote use of mobile money and discourage use of cash as a Covid-19 pandemic containment measure,” noted the report.

The decline was also blamed on the 5 percent changes made on employees’ PAYE slips at the time as well as a reduction in staff numbers in the sector in 2020.  PAYE forms the largest component of taxes collected, representing 35.9 per cent and 39 percent of the total taxes collected in the two periods under review.

It further found that the withholding taxes realised represented the third largest component of the total tax contribution (TTC) constituting 14 per cent and 17 percent for 2019 and 2020 respectively.

Corporate tax paid by all banks in Kenya represents 29.7 percent and 24.2 percent of the total corporate taxes paid in Kenya in 2019 and 2020 respectively, while PAYE collected by participating banks amounted to Sh 18.9 Billion in 2019 and Sh17.9 Billion in 2020, a 5.3 percent decline.