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Banking sector contributed 27% of all corporate taxes paid in Kenya in 2019,2020-Report

Speaking during the report’s release today, Kenya Bankers Association Chief Executive Officer Dr. Habil Olaka noted that the contribution indicates the industry has remained resilient,  navigated the challenges occasioned by the COVID-19 pandemic, and continued supporting the economy.

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Kenya Bankers Association CEO Dr.Habil Olaka(Left),Mrs.Rispah Simiyu, KRA Commissioner Domestic Tax and Mr.Titus Mukora(Right),PwC partner hold copies of total Tax contribution of the Kenyan Banking sector Report during the launch at Serena Hotel, Nairobi.PHOTO/Courtesy.

The banking industry contributed 27 percent of all corporate taxes paid in Kenya in 2020 and 2019 even as the adverse impact of the COVID-19 pandemic caused a 12 percent overall decline in their total tax contribution in 2020 compared to 2019.

A new report compiled by audit firm PricewaterhouseCoopers (PwC) on behalf of the Kenya Bankers Association attributes the decline to reductions in corporate taxes and Pay As You Earn (PAYE) collections.

“This decline is partly attributable to reduced tax rates, specifically reduction of corporate tax rate from 30 percent to 25 percent, reduction of the top PAYE rate from 30 percent to 25 percent and the reduction of Value Added Tax rate from 16 percent to 14 percent. The aim of these measures was to provide relief to taxpayers against adverse economic effects of the COVID-19 pandemic,’’ the report notes.

Corporate tax and PAYE are the largest contributors of the total tax contribution of the sector standing at 42.5 percent and 16.5 percent respectively.

Speaking during the report’s release today, Kenya Bankers Association Chief Executive Officer Dr. Habil Olaka noted that the contribution indicates the industry has remained resilient,  navigated the challenges occasioned by the COVID-19 pandemic, and continued supporting the economy.

“As an industry we recognise the important role the financial services sector plays in supporting  economic growth. In this regard, we remain committed  to sustain efforts towards anchoring business recovery in the face of the COVID-19 disruption,’’ he said, adding that the banking sector will continue to build capacity among vulnerable enterprises through de-risking initiatives such as the Inuka Enterprise Program.

Due to the COVID-19 pandemic, the  economy experienced a depressed economic performance and quality of assets, with provisioning for loan losses increasing by 47.5 percent to Sh.198.1 Billion from Sh.134.3 Billion in 2019.

Loan loss accommodations absorbed 45.7 percent of non-performing loans compared to 40.2 percent in 2019, according to the State of the Banking Industry Report 2020.

The industry also restructured customer loans worth Sh. 1.63 Trillion or 54.2 percent of the total Sh. 3 Trillion loan portfolios, with the percentage of gross non-performing loans to gross loans significantly increasing  to 14.1 percent by December 2020 compared to 12 percent in December 2019.

Despite the challenges, access to credit for MSMEs increased. According to the Central Bank of Kenya (CBK) 2020 MSME Survey report, lending to micro, small and medium-sized enterprises increased by 42 percent between 2017 and 2020 to stand at Sh.638.3 billion by December 2020, up from Sh.413.9 Billion in December 2017.

The report also notes that the Banks that participated in the study contributed 7.5 percent of the total government tax receipts in 2019 and 2020. “Considering a total population of 6 million registered taxpayers countrywide, this is indeed a very significant contribution,” commented Alice Muriithi, Associate Director at PwC Kenya and the lead technical advisor on the study, adding that the report raises a number of questions about how tax policy impacts the banking sector and the impact of tax policy on the sector’s contribution to the tax base and the economy.

The Total Tax Contribution of the Kenya Banking Sector report also reveals that the cumulative ratio of taxes borne to profit of 32 banks surveyed during the period was 48.5 percent, representing the Total Tax Rate (TTR) of the participating banks.

‘’A cumulative TTR of participating banks of 48.5 percent means that for every Sh. 100 of profits, banks bear taxes of  Sh. 48.5,’’ the report indicates.

“The taxman applies strict criteria in terms of which provisions can be tax deductible in determining taxable profits. In practice, there is misalignment between provisioning for accounting purposes and the deductibility of the same provisions for tax purposes, and this misalignment continues to drive up the effective tax rates for banks and particularly, the Total Tax Rate (TTR),” said Ms. Muriithi.

The report shows that banks invested approximately Sh. 1.6b Billion in technology in the years 2019 and 2020 combined. This is compared to approximately Sh. 1.3 Billion in the 2017 and 2018 periods, demonstrating the sector’s prior commitment to the digitization journey well before the beginning of the pandemic.

The report further shows a 42.2 percent decline in excise duty collected by the banking sector in 2020 relative to 2019, attributable to regulatory guidelines issued by the Central Bank of Kenya requiring banks to waive fees on transfer of money between bank accounts and mobile phone wallets and also waive balance enquiry charges as a measure to mitigate the COVID -19 pandemic. This is also aligned to the 8 percent decline in fees and commissions income earned by the banking industry in 2020 relative to 2019.

On a year-on-year basis, the 32 banks that participated in the total tax contribution study represent 95.2 percent of the industry in 2019 and 96.2 percent of the industry in 2020.

PwC Tax Partner Titus Mukora observed that the study offers an opportunity for the tax contribution of the banking sector to be quantified and analysed so that policy makers can assess whether the operating environment is supportive of the sector.

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Industrialist Shah receives 2021 Philanthropy Lifetime Award

The East Africa Philanthropy Network seeks to create awareness and a culture of philanthropy while inspiring emerging philanthropy leaders.

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Industrialist and philanthropist Mr Hirji Shah

Industrialist and philanthropist Mr Hirji Shah is the recipient of this year’s prestigious Philanthropy Lifetime Award at the East Africa Philanthropy Awards.

The award honours visionary leaders and philanthropists throughout the community doing extraordinary things to make East Africa a better place for the growth and development of Philanthropy.

Mr Shah serves in the Kenya National Qualifications Authority (KNQA) Council as a representative of the Federation of Kenya Employers (FKE).

He is the chairperson of the Planning research, outreach and policy (PROP) Committee of the Council and a member of Human resource administration and finance (HRAF).

KNQA in a statement said it is proud to be associated with Mr Shah and that Mr Shah has over years promoted and grown a culture of giving in the society,

“The objective of the recognition goes beyond motivating individuals and organizations but also aims to highlight best practices and creativity in local philanthropy, “said Mr Evans Okinyi in his congratulation message to Mr Shah.

Mr Shah is a director of several companies, including Mabati Rolling Mills Limited, Comcraft Kenya Limited, Kaluworks Limited, Booth Extrusions Limited, Booth Fire Fighting Limited, Bahari Forwarders Limited, Bahari Insurance Brokers Limited, Kifaru Investments Limited, Juhudi Investments Limited and Juhudi Distributors Limited.

The East Africa Philanthropy Network seeks to create awareness and a culture of philanthropy while inspiring emerging philanthropy leaders.

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Nikama Ndrama: How pilot cop rescued minors from abductor

Should you have any information that you would wish to share with us anonymously please dial our toll free line 0800722203. USIOGOPE!

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Chief Inspector Justine Ouya

Two girls aged 3 and 4 were last evening rescued by a police officer from a man who had abducted them from their home and was ferrying them to an unknown destination.

The innocent angels had been lured from their home as they played by one Jackson Mutinda, 31, who was arrested at a shell petrol station along Langata road, as he walked with the girls to a yet to be established location.

Chief Inspector Justine Ouya, an aircraft engineer at the National Police Service Airwing, had just landed from a troops resupply mission and was walking along Langata road when she came across the man holding the two girls by their hands. They were walking with the minors towards Karen.

“After observing him and the little girls briefly, her intuition as a police officer coupled with her motherly instincts led her to be suspicious,” said the Directorate of Criminal Investigations in a Facebook post.

She immediately stopped the man and interrogated him. She also spoke to the minors and established that the man was not their father as he had alleged.

Chief Inspector Ouya immediately restrained the man and raised the duty officer based at Wilson Airport, who responded with a contingent of officers instantly.

After interrogating the abductor, it was discovered that he had lured the little angels from their home in Muthurwa, promising to buy them a soda. The officers immediately set off for Muthurwa, in search of the parents to the minors.

After a few hours, the distraught parents of the angels identified as Judy Nyakio and Teresia Njeri were finally traced, desperately looking for their missing girls.

As they were reunited with their beautiful angels, the two parents could not hold back tears of joy thanking God for the miracle of seeing their babies alive and the officers for bringing them back home.

“The suspect is currently in custody at Langata Police Station, being processed for arraignment on Child Trafficking charges,” stated the DCI.

The Directorate of Criminal Investigations thanks C.I Ouya for going beyond the call of duty and rescuing the little angels from the jaws of their captor.

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ASALs counties declare formation of UPYA Movement ahead of 2022 polls

The UPYA movement will also be used as a tool to unite residents from ASAL areas to articulate a common political position and objectives for the 2022 elections, negotiate for greater socio-economic investment and development in the region.

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Leaders from ASALs counties addressing journalists in Naivasha.PHOTO/Pristone Mambili.

Leaders from Arid and Semi-Arid Lands (ASALs) of Garissa, Isiolo, Lamu, Mandera, Marsabit, Samburu, Tana River, Turkana and Wajir have declared to rally behind new political formation UPYA Movement.

The leaders led by Treasury Cabinet Secretary Ukur Yatani met in Naivasha on Saturday to reflect together on the future of their region to give it a voice and political direction at the national level.

They raised concerns on the effects of the ongoing drought in ASALs
gravely affecting lives and livelihoods in the region.

“We appreciate the quick response directed by President Uhuru Kenyatta declaring the drought a national emergency, thereby mobilizing local and foreign response to respond to the dire situation” they stated.

While noting with concern that despite ASAL areas constituting a vast land mass with a multi-ethnic, multi-religious and culturally diverse population, the leaders argued that has suffered from political and socio-economic marginalisation over the years without a unified voice, and only being regarded as a ‘swing vote’ region.

It is for these reasons that the leaders vowed to use UPYA Movement to ensure unity in the area and that their voice is heard.

“Having learnt from our past mistakes, the time has come to chart a brave and brighter future for the ASAL regions which remain Kenya’s most promising.We pledge our loyalty to the current government as led by His Excellency Uhuru Kenyatta, President of the Republic of Kenya and with whom we are working closely to resolve the immediate challenges affecting our regions.We declare that the UPYA movement will be the political platform at the national level speaking on behalf of the Arid and Semi-Arid Lands of Kenya. As an umbrella political platform, UPYA supports the revitalisation of 2-3 political parties in the region to guarantee the right of our people to participate in the 2022 general election” the said.

Under the new political formation,the leaders vowed to institutionalise and operationalise as as a viable coalition by establishing a functional governance structure from the national to the grassroots across the region.

The UPYA movement will also be used as a tool to unite residents from ASAL areas to articulate a common political position and objectives for the 2022 elections, negotiate for greater socio-economic investment and development in the region.

On the mass voter registration that the IEBC is planning to roll out in October 2021, the leaders called on IEBC to  assure the people of Northern Kenya that it has mechanisms to ensure every eligible citizen in the region is able to register despite the on-going drought.

The leaders also revealed that they wl work with like-minded leaders to unite towards a common agenda for the continued development of Arid and Semi-Arid Lands and the Republic of Kenya at large.

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