Listed banks’ tax bill increases 58pc after removal of cushions

Listed banks' tax bill increases 58pc after removal of cushions

A KCB bank branch at Kipande House, Nairobi. PHOTO | DENNIS ONSONGO | NMG The tax bill of listed Kenyan banks and their subsidiaries in the region rose by 58 percent in the first-half of the year, analysis showed, lifted by higher profits and removal of a special relief on corporate tax.

According to an analysis done by the Business Daily based on commercial banks’ half year disclosures, tax paid by the 10 lenders in the period cumulatively stood at Sh30.27 billion from Sh19.14 billion paid in the same period in 2020.

The jump is as a result of removal of the tax cuts meant to cushion Kenyans and businesses in the country from the effects of the Covid-19 pandemic that wrecked economies globally.

The government cut corporate taxes from 30 percent to 25 percent in April last year among other measures but were reversed in January this year.

A report released Thursday by PricewaterhouseCoopers (PwC) on behalf of the Kenya Bankers Association (KBA) shows that commercial banks in Kenya accounted for 24.1 percent of the total tax paid by corporates.

“The contribution indicates the industry has remained resilient, navigated the challenges occasioned by the Covid-19 pandemic, and continued supporting the economy,” said Habil Olaka, KBA’s chief executive.

The reduction in contribution was solely a result of reduced profitability by the sector in the pandemic year. Cumulatively, earnings before tax for the whole year dropped by 29 percent to Sh112.8 billion according to Central Bank of Kenya (CBK) data.

Despite the high contribution to total corporate taxes, last year’s 24 percent was a decline from 29.7 percent contributed by the sector in 2019.

From the half year analysis, KCB , the country’s biggest bank by market size (14.05 percent) booked the highest value of current tax in the period at Sh8.5 billion accounting for 28 percent of the total value followed by Equity whose tax bill was recorded at Sh6.4 billion.

Co-operative Bank which boasts a 9.56 percent market size in the country, had its current tax booked at Sh3.15 billion closely followed by Absa at Sh3.01 billion which had a market size of 6.23 percent at the end of last year, according to the Annual Banking Supervisions report.

The 10 listed Kenyan lenders combined reported a 73 percent jump in net earnings in the six-month period, growing from Sh38.3 billion to Sh66.15 billion, with Housing Finance being the only loss making lender in the period.Total current tax paid […]

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