Banks surpass Sh200 billion mark in tax contribution to government

PwC Partner Alice Muriithi, CS John Mbadi, Kimani Kuria, KRA Deputy Commissioner Ezekiel Obura and KBA CEO Raimond Molenje during the launch of the 2025 Total Tax Contribution Report at Serena Hotel, October 22, 2026. [Elvis Ogina, Standard]

Thirty-three banks and two microfinance institutions paid Sh205.58 billion in taxes to the government in the 2025 financial year, up by 5.53 per cent from Sh194.81 billion in 2024.

The amount accounted for eight per cent of total government revenue and 22.15 per cent of all corporate tax collected.

Of the total, institutions paid Sh98.36 billion directly, while the government collected Sh107.22 billion on its behalf. Taxes collected rose by 13.24 per cent, driven by a 29 per cent increase in withholding tax, which overtook corporate tax to become the second-largest contributor to total tax payments.

Taxes collected from employees also rose 6.4 per cent, reflecting the full-year impact of the Affordable Housing Levy and National Insurance Fund (NIF), along with higher National Social Security Fund (NSSF) contributions.

According to the 2025 Total Tax Contribution Report by PricewaterhouseCoopers (PwC), released on Thursday on behalf of the Kenya Bankers Association (KBA), the 33 participating banks represented an estimated 96.9 per cent of the banking sector’s net assets, providing a strong basis for assessing the industry’s overall tax contribution.

The banks’ total tax contribution was equivalent to 1.8 per cent of Kenya’s Gross Domestic Product (GDP), compared with 1.24 per cent in South Africa.

The average in-house cost of tax compliance rose by 62 per cent to Sh30.99 million in 2025, up from Sh19.10 million in 2024. External consultants accounted for the largest share of the costs, at Sh20.72 million.

Each of the 33 banks also spent an average of 103 business hours on tax compliance and made about 45 tax payments every month.

Companies in Kenya are required to remit deducted withholding tax to the Kenya Revenue Authority (KRA) within five working days after the deduction is made.

Taking a longer-term view over a period of 2018 to 2025, the sector's annual TTC increased from Sh99 billion to Sh205.58 billion, growth attributed to the strengthening of the sector's capital base.

“For the first time, the taxes contributed have exceeded the Sh200 billion mark and since we started doing this study seven years ago, the taxes collected have surpassed the taxes borne, and they have grown at a much faster rate, growing at 13.24 per cent from the prior year compared to taxes borne, which declined at slightly below two per cent,” said Alice Muriithi, partner at PwC Kenya, during the report release in Nairobi.

“What we need for us to grow the contribution by everybody is to provide a facilitative environment whereby we are recruiting larger and bigger businesses to join the formal regulated sector to reduce over-reliance on just one sector.”

This even as Kenya National Bureau of Statistics (KNBS) report say about 18 million people are employed in the informal sector while three million in the formal sector.

Kenya’s banking sector total tax collected, compared to South Africa and United Kingdom (UK) economies, was high at eight per cent, followed by South Africa at 4.9 per cent and the UK at 4.3 per cent.

 “If you benchmark that contribution, what this means to me is that there is a bit of overreliance by the banking sector on payment of taxes. This is despite the two economies being larger and more formal than Kenya’s, meaning in the two economies, there are many large formal businesses and so the government does not rely on the banking sector,” she said.

Kenya Bankers Association CEO Raimond Molenje urged National Treasury Cabinet Secretary John Mbadi to increase revenue generation, job opportunities for Kenyans and restore trust in government.

“The proposed five per cent tax cut for all workers is not merely about putting more money in people’s pockets. It is also about rebuilding trust in government and encouraging Kenyans to continue contributing to the economy,” said Molenje.

Kenya Revenue Authority (KRA) Commissioner General Adan Mohamed lauded the banking sector for its tax contributions.

Mohamed said there is an ongoing conversation on each of the concerns, including filing frequencies, system integration challenges and tax reconciliation and administrative complexities affecting the banking sector and taxpayers in general.

“What stands out for me is that for the first time taxes collected exceed taxes borne since this study began. That finding highlights a very important reality that the banking sector is not only a taxpayer but one of the government’s most important partners in tax administration,” said Mohamed in a speech read by Ezekiel Obura, deputy commissioner.

Kuria Kimani, the Chairperson of the Finance Committee in the National Assembly, also lauded banks for their roles in tax collection and remittances.

“When public institutions and businesses work together, they can strengthen revenue collection while making compliance more efficient and predictable,” said Kimani.

The Treasury Cabinet Secretary John Mbadi said efficient tax administration is essential to a sound business environment, adding that priorities include clearer taxpayer guidance, simpler procedures and reliable digital systems that make it easier to comply with the law.

“Greater use of technology and relevant information can improve the accuracy of returns and strengthen compliance. Implementation should be proportionate and consistent with applicable confidentiality and data protection requirements, while addressing duplication in reporting,” said Mbadi.

“Banks remain important partners in facilitating tax payments and remittances. Continued engagement between the National Treasury, the KRA and the industry can help resolve practical compliance challenges and improve the efficiency of revenue collection.

The CS urged the industry to identify specific administrative constraints and propose workable solutions, supported by examples and an assessment of their costs.

“This will help distinguish matters that require legislative amendment from those that can be resolved through administrative improvements,” he said.

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