Kenyan banks and microfinance institutions collected KSh107.22 billion on behalf of the government in 2025, a 13.24% increase driven largely by higher withholding tax receipts.
For the first time since the PwC–Kenya Bankers Association study began, taxes collected by participating institutions exceeded the taxes they bore directly.
The findings appear in the 2025 Total Tax Contribution Report, released on October 22, 2026. The study covered 31 commercial banks and two microfinance institutions representing approximately 96.9% of the banking sector’s net assets. pwc.com
Total tax contribution reaches KSh205.58 billion
The increase in collections helped lift the participating institutions’ combined tax contribution to KSh205.58 billion, up 5.53% from KSh194.81 billion in 2024.
That total comprises two distinct categories: taxes paid as a cost to the institutions themselves and amounts collected from others and remitted to the government.
| Measure | 2024 | 2025 | Annual change |
|---|---|---|---|
| Taxes collected for government | KSh94.69 billion | KSh107.22 billion | Up 13.24% |
| Taxes borne directly | KSh100.12 billion | KSh98.36 billion | Down 1.77% |
| Total tax contribution | KSh194.81 billion | KSh205.58 billion | Up 5.53% |
The combined contribution was equivalent to 8% of total government receipts, according to KBA. It should not be interpreted as KSh205.58 billion paid entirely from banks’ own earnings. Kenya Bankers Association
Withholding tax becomes the largest collection category
Withholding tax collections increased 29.4% to KSh43.95 billion, compared with KSh33.97 billion a year earlier.
The category overtook employment-related collections for the first time, reflecting a shift in the composition of revenue administered by participating lenders.
The report linked the increase partly to changes in the treatment of royalties under the Tax Laws (Amendment) Act, 2024, which took effect in December 2024.
Withholding tax on royalties rose 159%, while collections associated with professional fees increased 292%. Investment by some lenders in core banking systems and technology infrastructure contributed to the higher payments attracting withholding tax.
These increases concern the amounts collected, rather than equivalent increases in statutory tax rates.
Employment-related collections rise despite lower PAYE
People-related collections grew 6.4% to KSh36.81 billion, supported by higher Affordable Housing Levy, Social Health Insurance Fund and NSSF contributions.
PAYE moved in the opposite direction, falling 2.98% to KSh30.82 billion even as reported employee wages increased 15.61% to KSh142.44 billion.
PwC attributed the PAYE decline partly to reliefs, deductions and exemptions that may have reduced taxable employment income.
The figures show why growth in total wages does not necessarily produce an identical movement in PAYE receipts. The broader people-related category also includes statutory contributions beyond income tax.
Excise duty recovers as lending increases
Excise duty collections rose 5.46% to KSh23.90 billion, reversing the decline recorded in 2024.
The report associated the recovery with stronger lending activity. Net loans and advances increased 6.9% to KSh4.35 trillion, supporting fees and charges subject to excise duty.
However, other collection categories weakened. Withholding VAT declined 32% to KSh1.71 billion, while other taxes collected fell 10.22% to approximately KSh860 million.
The overall increase therefore reflects substantial growth in selected categories, particularly withholding tax, rather than a rise across every revenue stream.
Banks’ collection role grows alongside their own tax payments
The report highlights the banking sector’s dual role in public finances.
Banks pay taxes arising from their own operations, but they also administer deductions and collections associated with employees, suppliers and customers. Those agency responsibilities accounted for the larger share of their reported contribution in 2025.
That distinction matters when assessing the figures: higher collections demonstrate increased revenue passing through banks, but do not necessarily indicate that lenders’ own tax burden rose.
With taxes borne directly declining while collections increased, the latest results show the government relying more heavily on banks as revenue collection and administration channels.
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