Banks in Kenya are unlikely to meet their tax contribution targets in 2022 due to current economic conditions, according to a new report.

The report, produced by PwC Kenya in partnership with the Kenya Bankers Association, said that the present economic climate will likely reduce the volume and value of bank transactions this year.

The estimates came after the 2021 tax contributions reached a five-year high of 129.52 billion Kenyan shillings ($1.086 billion), rising 23.59% year-on-year.

“The increase in banks tax contribution is driven by a substantial jump in corporate tax borne, excise duty collected and withholding tax collected - all on account of the economic recovery witnessed in 2021 as a result of reopening all sectors of the economy,” the report stated.

A total of 38 banks, representing 97% of the market share, made a total of 129.52 billion shillings in tax contributions in 2021, marking an increase of 24% from the 104.8 billion shillings in 2020.  

In 2021, the country’s gross domestic product (GDP) rebounded, growing 7.5% from -0.3% in 2020.

With the economy rebounding, Kenya Revenue Authority’s total tax collections hit 1.899 billion shillings in 2021, with banks contributing 6.82%.

Banks’ corporate taxes stood at 50.69 billion shillings in 2021, representing 26% of all corporate taxes collected in Kenya, up 24% year-on-year.

“2021 was 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,” Peter Ngahu, PwC Country and Regional Senior Partner, Eastern Africa, said in a statement.

“Various economic indicators point towards a sector that recovered from the pandemic in 2021. These indicators include a 47.67% reduction in loan loss provisions in 2021 relative to 2020 and an 11% growth in total deposits of the sector in 2021 relative to 2020,” he added.

 (Editing by Cleofe Maceda; cleofe.maceda@lseg.com)