How banks can help to improve their customers' tax compliance

Discussions on tax compliance in Kenya frequently focus on enforcement and penalties. However, we seldom consider: What if the issue isn't willingness but rather capacity?

The truth is that numerous businesses and individuals find it challenging not due to a desire to avoid their responsibilities but because understanding tax systems resembles interpreting a foreign language without a guide. This is where banks have a unique opportunity to transform into facilitators of compliance instead of just being intermediaries of trade.

Kenya's financial industry has experienced significant digital evolution. The Kenya Bankers Association's Banking Customer Satisfaction Survey 2024 indicates that nearly 70 per cent of banking clients now favour digital channels for transactions. This shift signifies a fundamental transformation in how individuals interact with financial services.

Although the sector has digitised payments, transfers and savings, we have only begun to explore how these platforms could clarify tax compliance. The framework is in place. The clientele is involved. What lacks is a conscious attempt to integrate tax education into the daily banking experience.

Take the Micro, Small and Medium businesses (MSMEs) for instance. They are essential to Kenya’s economy, contributing over 40 per cent of the country’s GDP income and employing over 15 million people. However, compliance rates for taxes among MSMEs continue to be persistently low, often not because of intentional evasion but frequently due to misunderstandings regarding obligations, deadlines and procedures.

These companies engage with their banks every day - be it in accepting payments, handling cash flow or obtaining credit. Why can't these touch-points also act as opportunities for financial empowerment, paving the way for tailored tax education and streamlined compliance tools to boost business success?

The case for this approach strengthens when we examine customer satisfaction data. The Kenya Bankers Association's 2024 Banking Customer Satisfaction Survey revealed an overall score of 73.4 per cent, driven largely by digital improvements. Trust, it turns out, is built through utility and clarity.

When banks demonstrate genuine commitment to customer success - not just through lending or transaction services, but through education that impacts daily operations - they deepen relationships in ways that pure product offerings cannot match. Tax advisory tools, when thoughtfully integrated into banking platforms, become not burdensome add-ons but valued resources.

Some might argue this is not a bank's job. Isn't tax education the revenue authority's responsibility? Perhaps. But waiting for a single institution to educate millions of taxpayers while simultaneously collecting revenue creates an inherent conflict of interest. Banks, by contrast, occupy a unique position of trust and accessibility.

Globally, according to KPMG's Global Customer Experience Excellence Report 2024-2025, 77 per cent of top-performing brands increased customer experience scores by 1.3 per cent year-on-year through data-driven initiatives. This same analytical capability could transform tax education from generic pamphlets to personalised, timely guidance based on actual transaction patterns and business cycles.

The challenge, of course, is simplification. Tax regulations are complex, often necessarily so. However, complexity does not justify confusion. Banks can collaborate with tech providers to develop tools that convert regulatory mandates into simple language, provide detailed compliance instructions and enable payments directly in banking applications.

Community - focused approaches - where banks gather business groups for collaborative learning on tax compliance - have demonstrated potential, transforming a seemingly solitary challenge into collective understanding.

This is not charity. Instead, it is informed self-interest. Businesses that do not comply encounter penalties, asset seizures and interruptions to operations. All these jeopardise their capacity to service loans and sustain banking partnerships.

By contrast, tax-compliant businesses operate with confidence, access government tenders and build creditworthiness. When banks invest in customer education around compliance, they are investing in the stability of their own portfolio.

The challenge for Kenya's banking industry isn't whether to participate in tax education, but how swiftly we can expand existing solutions that are still in early stages. The digital framework is prepared. Customer demand for convenience is evident. 

What is left is leadership - the readiness to view banks not just as financial intermediaries but as builders of an economy where tax compliance is the easiest route rather than the heaviest load.

The writer is the Director of Consumer Banking at SBM Bank Kenya