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Commercial banks contributed Sh129.5 billion as their share of total tax contributed to the Kenya Revenue Authority (KRA) last year, signaling a recovering economy from the Covid-19 pandemic meltdown.

A new report commissioned by the Kenya Bankers Association (KBA) released yesterday indicates that the growth was a 23.6 per cent jump from the prior year’s Sh120 billion, a period that was characterised by economic downturn when the pandemic first manifested across all sectors of Kenya’s economic.

“The year 2021was a year of economic recovery, coming on the backdrop of greater access to vaccines and reopening of all sectors of the economy, especially the services industry,” notes the report that was prepared by audit firm PwC.

Alice Muriithi, the PwC’s Associate director Tax and Transfer pricing said the total tax contribution represented 6.82 per cent of all government receipts.

In the 2020/ 21 fiscal year, KRA collected Sh1.9 trillion, a clear indicator that the industry continues to be a significant contributor of taxes in Kenya.

“The growth of the total tax contribution of the study participants of 23.6 per cent is slightly lower than the growth in total government receipts of 25.8 per cent. Nonetheless, this is a tremendous contribution given that this tax contribution is made by 38 taxpayers that participated in the study against a background of approximately 6.1 million active taxpayers in the country,” the report states.

Out of the total amount, taxes borne (paid directly by entities) was Sh63.9 billion while those collected by banks accounted for Sh65.6 billion. The 38 commercial banks represent 97 per cent of the market share from an asset perspective, said Muriithi.  KBA attributed the increase to a 13.5 per cent rise in corporate tax, equivalent to Sh49.5 billion against Sh43.7 billion in 2020, borne by a participating banks. The lenders reported a 85.2 per cent increase in their profit before tax, a 46.7 per cent reduction in their loan loss provision and a 9.30 per cent growth in loans and advances in the period under review.

Pre-Covid-19 figures

A total of Sh14.3 billion was collected in the form of excise tax, while withholding tax raked in Sh22.9 billion in what KBA said was the expansion in the scope of excise duty on “other fees and commission” brought in by the Finance Act 2021 and growth in interest paid by banks to depositors, which grew by 11 per cent to Sh4.6 trillion from Sh4.2 trillion in 2020.

Commenting on the study, KBA tax sub-committee chairman Peter Mungai said the fact that the 2021 contribution had surpassed the pre-Covid-19 figures showed the resilience and agility of the industry and in general the economy which has gotten on the right traction.

He said the momementum has been shown by the half year results numbers, indicating the performance of the economy’s continued to improve. “We are cautiously optimistic as we go into the second half of the year.

There are many unknowns. What is closer to us is the transition. We hope to get done with it in a seamless and smooth manner to experience the same kind of growth,” Mungai added. The industry also continued to scale up in digitisation and innovation, apparent through closure of physical branches, higher volumes of digital transactions, reduction of ATMs and through remote working.

The digital loans grew by 38 per cent year-on-year with the current books standing at Sh4.8 billion against Sh3.2 billion the prior year. “What that tells us is that we are becoming very responsive in terms of technology solutions for our customers,” said Mungai.