Kenya Bankers Association (KBA) CEO Habil Olaka. FILE PHOTO | NMG The tax collected from banks fell 23 percent to Sh42.4 billion last year, reflecting subdued business performance in an environment scorched by the economic fallout of the Covid-19 pandemic.
Lenders lobby, the Kenya Bankers Association, says taxes plunged following a 30.9 percent drop in 2020 gross profits, which fell to Sh107.3 reflecting the lowest returns since 2012.
The decline in profits was brought about by impairment losses and the impact of the monetary policy rate cut on interest margins.
“Analyses of tax contribution of the banking sector shows that the sector contributed Sh42.4 billion in 2020 down from Sh55.4 billion in 2019, largely reflecting the depressing effects of the pandemic on incomes,” said Kenya Bankers Association.
“While this represents a 23.6 percent drop in the tax contribution, it highlights the extent to which the sector would have contributed more to tax revenue had it not borne most of the weight of supporting other sectors of the economy.”
The Covid-19 pandemic hit the economy, which reduced Kenya Revenue Authority (KRA) tax receipts in the first half of last year. The situation was compounded by government tax relief measures on corporates, pay-as-you-earn and value-added taxes.
The KRA opted to increase tax collection through enforcement measures on non-compliant taxpayers, which saw the taxman break an eight-year revenue underperformance jinx to hit targets set by the Treasury.
According to the taxman, the authority collected a record Sh1.669 trillion in tax revenues during the 2020/21 fiscal year against a target of Sh1.652 trillion, representing a surplus of Sh16.8 billion.
Banks were not spared as the taxman hit lenders including KCB , Cooperative Bank , Absa Bank and Stanbic Bank with tax bills on appraisal fees, loan commitment and processing fees, which the KRA claimed are subject to excise duty.
The tax tribunal, however, ruled that the fees are part of loan interest and are not subject to excise duty.
The taxman has also coopted the National Intelligence Service, Directorate of Criminal Investigations, Financial Reporting Centre, Ethics and Anti-Corruption Commission, and Office of the Director of Public Prosecutions as mart of the multi-agency task force, which has a framework for sharing information to catch tax cheats. NHIF Building in Upper Hill, Nairobi. FILE PHOTO | NMG A number of law changes target the National Hospital Insurance Fund (NHIF) in what is expected make the State insurer better in terms of covering more people […]