NAIROBI, Kenya – Kenya’s banking sector paid a total of Sh194.81 billion in taxes to the National Treasury for the year ending Friday, December 31, 2024, cementing its role as a critical pillar of the nation's fiscal health. This substantial contribution, detailed in the 2024 Kenya Banking Sector Total Tax Contribution Report released on Friday, October 24, 2025, by the Kenya Bankers Association (KBA) and PwC Kenya, accounted for 8.09% of the government's total tax receipts.

The report, which analyzed data from 34 commercial banks and two microfinance institutions, provides a granular view of the sector's economic impact. The total amount is composed of Sh100.12 billion in taxes borne directly by the institutions, such as corporate tax, and Sh94.69 billion in taxes they collected on behalf of the government, including Pay As You Earn (PAYE) and withholding taxes.

A Shifting Tax Burden

A key insight from the report is the changing composition of the sector's tax contributions. While corporate tax remained the single largest component at Sh69.41 billion—representing 35.6% of the total—it registered a 4.98% decline compared to 2023. This decrease occurred despite a period of significant profitability for many lenders. According to the Central Bank of Kenya's 2024 Bank Supervision Annual Report, the sector's profit before tax grew by 18.2% to Sh260 billion.

The dip in corporate tax was counterbalanced by a sharp increase in 'people-related taxes'. This surge was primarily driven by the full-year implementation of the controversial Affordable Housing Levy (AHL). Collections of the AHL by the participating banks soared by 113% to reach Sh3.45 billion. This highlights a broader trend where new and expanded payroll-based levies are increasingly significant sources of government revenue.

Speaking on the findings, PwC Regional Senior Partner Peter Ngahu noted the growing importance of these taxes. “Beyond the headline numbers, this year's report reveals an important trend — the growing significance of people-related taxes,” he stated on Friday, October 24, 2025.

The Housing Levy's Full Impact

The Affordable Housing Levy, a cornerstone of President William Ruto's economic agenda, was formally enacted through the Affordable Housing Act on March 19, 2024. The law mandates a 1.5% deduction from employees' gross monthly salaries, which is then matched by a 1.5% contribution from the employer. The 2024 calendar year marked the first full period of its implementation, explaining the dramatic 113% rise in collections from the banking sector's substantial workforce.

Data from the Kenya Revenue Authority (KRA) for the fiscal year 2024/2025 showed that total AHL collections nationwide reached Sh73.2 billion, surpassing the Treasury's target of Sh63.2 billion. The banking sector's contribution is a significant part of this national total, reflecting its status as a major formal employer.

Sector Profitability and Economic Headwinds

The sector's ability to remit such large tax figures is a direct result of its profitability. However, the operating environment in 2024 was complex. While earnings grew, the asset quality for listed banks deteriorated, with the weighted average Gross Non-Performing Loan (NPL) ratio increasing to 13.2% in FY'2024 from 12.6% in FY'2023. This was driven by increased borrowing costs and elevated credit risk.

The Total Tax Rate (TTR)—a measure of taxes paid for every Sh100 of profit—decreased from 46.77% in 2023 to 38.5% in 2024. This reduction was primarily attributed to the overall increase in bank profitability, which grew faster than the taxes borne directly by the institutions.

The government remains the largest beneficiary of the value created by the banking sector, receiving 54.95% through taxes. Employees received 25.62% in salaries and benefits, while shareholders took home 19.44% in dividends.

Implications for Kenya

The report underscores the banking sector's outsized role in funding the national budget. With just 36 institutions contributing over 8% of all tax revenues, it highlights the economy's heavy reliance on a small number of large, compliant taxpayers. Alice Muriithi, a Tax and Legal Services Partner at PwC, pointed out this concentration, noting that these 36 taxpayers are part of a pool of just over eight million registered taxpayers in Kenya.

This reliance makes the sector's stability and regulatory environment critical for national fiscal planning. KBA Chief Executive Officer Raimond Molenje emphasized that the data provides valuable insights for policymakers aiming to balance fiscal sustainability with the resilience of the banking sector. As the government continues to pursue its revenue targets under the Medium-Term Revenue Strategy, the performance and tax contributions of the financial sector will remain under intense focus.