The profile of taxes borne and collected
In this segment...
4.1: Taxes borne
4.2: Taxes collected
4.3: Total Tax Contribution
4.1: Taxes borne
Taxes borne are a cost to the business and therefore directly affect a company’s financial results. From the data below, the following trends can be seen:
a) Corporation tax forms the largest component of taxes borne, representing 84.1% and 79.6% of the total taxes borne by participating banks in 2017 and 2018.
b) Irrecoverable VAT is the second largest component of taxes borne representing 10.5% and 14.1% of the total taxes borne by participating banks in 2017 and 2018.
c) VAT on imported services represents 2.2% and 3.1% of total taxes borne in 2017 and 2018 respectively.
d) Withholding tax borne formed 3.2% and 3.3% of total taxes borne in 2017 and 2018 respectively.
4.2: Taxes collected
Taxes collected are those which are generated by a company’s operations, but are collected from others on behalf of the government, e.g. income tax deducted under PAYE, employee Social Security, withholding taxes, withholding VAT and net VAT. The companies generate the commercial activity that gives rise to the taxes and then collects and administers the taxes on behalf of the KRA.
Taxes collected reflect approximately half of the industry’s total tax contribution. This is a significant burden imposed by KRA on the banks having in mind that collection of taxes comes with administrative burdens and time constraints.
Corporation tax forms the largest component of taxes borne.
PAYE was the most significant tax collected making up 40.8% and 38.2% of total taxes collected in 2017 and 2018 respectively. Withholding taxes collected was the second largest tax collected, coming to 37.1% and 36.4% of total taxes collected for 2017 and 2018. Excise duty collected was KES 5.9 bn and KES 8.3bn representing 12.8% and 16.5% of the total taxes collected in 2017 and 2018 respectively. Withholding VAT collected was KES 2.8bn and KES 2.9bn in 2017 and 2018, representing 6.1% and 5.7% of the total taxes collected by banks.
4.3: Total Tax Contribution
The total tax contribution (TTC) profile – the sum total of taxes borne and taxes collected – shows that corporation tax made up 48.4% and 39.0% the TTC in 2017 and 2018 and is the most significant tax contribution that banks make to taxes. This is followed by PAYE which represented 17.3% and 19.4% of the TTC for 2017 and 2018 respectively. Withholding taxes collected represented the third largest component of the TTC constituting 15.8% and 18.5% for 2017 and 2018. Other taxes such as excise duty, irrecoverable VAT, property taxes and other payments to government constituted the remaining portion of the TTC.
Taxes collected reflect approximately half of the industry’s total tax contribution.
