Purpose and outline of the study
In this segment...
3.1: Methodology
3.2: Participation in the TTC study relative to Kenya Banking Sector receipts
The purpose of the study is to generate robust data to quantify the tax contribution made by the Kenyan banking sector. Such data has been collected in accordance with a credible and well understood framework. The study shows that the contribution by banks is broader than corporation tax, with employment taxes, withholding income tax, withholding VAT, irrecoverable VAT, excise duty and other taxes deducted at source adding to the total. This study also contains data to highlight the impact of legislative amendments such as the interest rate cap and the impact of technology on the industry and invariably, on the tax contribution of the industry.
3.1: Methodology
The study uses the Total Tax Contribution designed by PwC United Kingdom. This framework provides a standardised methodology for companies to measure and communicate all the taxes and contributions that they pay.
The study collected data from 38 Kenya Bankers Association (KBA) members operating in the banking sector relating to all Kenya taxes borne and collected in the accounting periods ending 31 December 2017 and 31 December 2018.
PwC has anonymised and aggregated this data to produce the study results. PwC has not verified, validated or audited the data and cannot give any undertakings as to the accuracy of the study results.
The TTC framework is straightforward in concept, not tax technical and therefore relatively easy for stakeholders to understand. The framework makes a distinction between taxes borne by the company and taxes collected.
Taxes borne are the company’s own contribution in taxes that impact their results, e.g. corporation tax, irrecoverable VAT and withholding taxes borne.
Taxes collected are those that the company administers on behalf of government and collects from others, e.g. income tax deducted under PAYE and excise duty collected. Taxes collected have an administrative cost for the company and will invariably have an impact on the company’s business operations. Taxes collected do not include payments of taxes to the KRA made by banks’ customers through banking channels.
The results of this study are a measure of the taxes paid by members, covering both taxes borne and taxes collected. The results provide information which would not otherwise be in the public domain, since this is not information the companies are required to disclose in their financial reports. Where we refer to data published by the Kenyan government and Kenya Revenue Authority, this is clearly indicated.
3.2: Participation in the TTC study relative to Kenya Banking Sector receipts
Thirty-eight KBA members participated in the study, providing data on their taxes borne and taxes collected for their accounting periods ending 31 December 2017 and 31 December 2018. Data received related to payments to the Kenya public finances. Using net assets as a market share indicator, the 38 institutions represent approximately 95.1% by market share of the banking industry.
No tax payments to foreign tax authorities were included. All “Tier One” banks participated in this study.
Data was also obtained from the KRA in respect of the following taxes: Corporation tax, PAYE, net VAT, withholding VAT, withholding tax collected, withholding tax on rental income, excise duty on financial services and others[1].
Thirty-eight KBA members participated in the study, providing data on their taxes borne and taxes collected for their accounting periods ending 31 December 2017 and 31 December 2018
[1] Others consist of: advance tax, capital gains tax, stamp duty and land rent