The Kenya Bankers Association (KBA) has challenged the government to consider creating a more enabling environment for banks to do business lamenting lack of incentives for the sector despite the huge total tax contributions the lenders post.
Speaking during the release of the Total Tax Contribution of the Kenya Banking Sector report on Tuesday, KBA chief executive Dr Habil Olaka noted that the government has made concerted efforts to provide different sectors of the economy with incentives over the years including manufacturing but none are ever issued to banks.
“When the treasury cabinet secretary reads the budget every year and announces change in government policy to create an enabling environment for certain sectors to do business, you will never hear banks being mentioned anywhere despite massive corporate tax contributions,” said Dr Olaka.
According to the report authored by financial services firm PricewaterhouseCoopers (PwC), the banking sector contributed Ksh39 billion corporate tax in 2018 which represents 24% of the total Ksh162.4 billion corporate tax paid in Kenya last year.
In 2017, the banking sector contributed Ksh52 billion corporate tax, a 28% contribution of the Ksh185 billion total corporate tax paid in Kenya that year.
“The study revealed that for every ksh4 of corporation tax paid in Kenya, approximately Ksh1 was paid by the baking sector,” reads the report “In 2018, the financial services sector contribution to GDP growth ranged from 0.1% to 0.2%,”
According to the report, 43.5% of the banks’ operating profits generated in 2018 were spent in taxes.
It further states that the government effected a 42% increase in excise taxes.
“There was a 42% increase in excise taxes collected by banks in 2018 as compared to the previous year. This corresponds to the rising prominence of excisable non-funded income,” adds the report.
Conversely, in 2018, there was a 2% rise in fees and commissions charged by the banking industry.
In addition, the excise duty rate for non-funded income increased from 10% to 20% which also contributed to the high growth of excise duty collected by banks.