Banks collected more tax for the government than they paid themselves in 2025, study shows

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Kenya’s banks handed the government KSh205.58bn in taxes in 2025, and for the first time most of that money was tax they collected from customers, staff and suppliers rather than tax they paid themselves.

The figures come from the 2026 Total Tax Contribution Report, prepared by PwC Kenya with the Kenya Bankers Association (KBA) and released by the KBA in Nairobi this week. The total was 5.53% higher than KSh194.81bn in 2024 and equal to 8% of total government receipts.

The study covered 33 institutions, 31 banks and two microfinance institutions, which together hold 96.9% of the sector’s net assets. PwC said it was the first time since the study began, seven editions ago, that the sector’s contribution had passed KSh200bn.

Collected versus borne

Of the total, KSh98.36bn was tax the institutions bore directly. The other KSh107.22bn was collected on the government’s behalf, through PAYE deducted from employees, withholding tax and excise duty on bank charges.

Withholding tax collected rose 29.40% to KSh43.95bn, from KSh33.97bn, overtaking PAYE as the largest category. People taxes collected, mainly PAYE, rose 6.40% to KSh36.81bn, and excise duty collected rose 5.46% to KSh23.90bn.

Some smaller lines grew much faster. Withholding tax on professional fees rose 292% and withholding tax on royalties 159%. Social Health Insurance Fund collections jumped 221.43% and NSSF contributions 126.44%, following changes to both deductions.

Corporate tax paid by the banks rose only 2.06%, to KSh70.84bn from KSh69.41bn, which was 22.15% of all corporate tax the government collected. The report says that growth was modest next to the rise in profit before tax, partly because banks have put more money into tax-exempt government securities.

The cost of compliance

Complying with tax rules is getting more expensive for lenders. The average annual compliance cost per institution rose 62.25%, from KSh19.10m to KSh30.99m. Banks spent an average of 103 business hours a month on tax work and made about 45 tax payments a month. External tax consultants cost each institution an average of KSh20.22m a year.

Since 2018 the sector’s total tax contribution has risen 107.66%, from KSh99bn, while net assets grew 89.42% to KSh8.35trn and customer deposits 87.73% to KSh6.12trn.

PAYE debate

The launch came as the Treasury prepares to take workers earning up to KSh32,333 a month out of PAYE. KBA chief executive Raimond Molenje used the event to push for relief for all workers.

“As we make Pay As You Earn adjustments, let’s consider how we can help Kenyans restore trust in their government. The proposed 5% 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,” he said. The association had earlier called for a higher minimum taxable income.

Treasury CS John Mbadi said the government would keep talking to industry on tax changes. “The National Treasury will continue to engage stakeholders on reforms to improve the coherence of tax legislation, strengthen compliance, and support a predictable investment environment,” he said.

Kimani Kuria, who chairs the National Assembly’s Finance and National Planning Committee, said that as Parliament prepares to consider the Finance Bill, 2027, Kenya needs “a tax framework that is fair, predictable, efficient; and ensures that public resources are used responsibly to improve the lives of all.”