Sunday, August 28, 2022

Revealed: The Treasury’s private sector cash cows

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The National Treasury building in Nairobi on Sunday, May 24, 2020. PHOTO | DENNIS ONSONGO | NMG

By CHARLES MWANIKI More by this Author

Seven large firms contributed in excess of Sh300 billion to the National Treasury in taxes, duties and licence fees in the past year, underlining their strategic importance to the economy.

This is the equivalent of 15 percent of the Sh2.03 trillion in revenue that the government collected in the fiscal year ended June 2022.

The list of the top private sector contributors to the government’s kitty includes the top listed blue chip firms, as well as players in the mining and telecoms sectors that pay billions of shillings in licence fees and royalties.

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Safaricom, courtesy of its position as Kenya’s most profitable and highest grossing firm, is the biggest private sector contributor to government coffers as per public financial records.

The telco said in its annual report for the year ended March 2022 that it paid the government Sh124.7 billion in taxes, duties and licence fees, an increase from Sh105.92 billion in the previous year.

The government also owns 35 percent of Safaricom, equivalent to 14.02 billion shares, which earned it a dividend of Sh19.5 billion from the company in the period.

The telco declared a total dividend of Sh1.39 per share in the year to March, which comprised an interim payout of Sh0.64 per share and a final dividend of Sh0.75 per share.

Other than direct corporate taxes and duties such as excise that they gather on behalf of the government, telcos also remit licence fees for services such as voice, data and mobile money.

Airtel Kenya has this year paid the government a total of Sh6.6 billion ($55 million) in licence fees.

The firm, whose parent Airtel Africa is listed on the London bourse, paid the Communications Authority of Kenya (CA) $10 million (Sh1.2 billion) in March for a network licence it will use for 10 years.

In May, it paid CA $5 million (Sh600 million) as part of payment for its operating and spectrum licence running from 2015 to 2025. This was the first of four instalments of an out-of-court settlement with the government following a protracted dispute over licence fee claims, where the telco agreed to pay $20 million (Sh2.4 billion).

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In July, Airtel also paid $40 million (Sh4.8 billion) for a licence on additional fourth-generation (4G) Internet services in the country.

Excise or sin taxes make up a significant share of the contribution made by cigarette maker BAT Kenya and brewer EABL.

EABL said in its results for the year ended June 2022 that it paid a total of Sh92.9 billion in direct and indirect taxes. Kenya accounted for 68 percent of EABL’s sales in the period, Uganda 18 percent and Tanzania 14 percent.

EABL’s direct or corporate taxes amounted to Sh8.4 billion in the period, while indirect taxes (for example excise and VAT) stood at Sh84.5 billion.

BAT Kenya said in its annual report for 2021 that it contributed Sh18 billion to the exchequer in corporation, PAYE, VAT and excise taxes for the 12 months to December 2021.

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Kwale miner Base Titanium’s results for the full year to June — released last week — showed the government collected Sh6 billion in the form of taxes and royalties after its net income grew threefold.

Kenya’s top two banks, Equity Group and KCB, together paid Sh24.1 billion in corporate taxes in the year to December 2021 at the group level which includes several regional subsidiaries.

Equity paid Sh12.2 billion in tax, while KCB’s stood at Sh11.9 billion.

cmwaniki@ke.nationmedia.com

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