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Kenya’s Treasury Loses Capital Gains Battle Against Stockbrokers

Kenya’s Treasury Loses Capital Gains Battle Against Stockbrokers

From Business Daily

Treasury secretary Henry Rotich has shifted the burden of paying and accounting for capital gains tax to investors at the Nairobi Securities Exchange (NSE).

This ends the fight with stockbrokers that nearly paralysed trading at East Africa’s largest bourse.

Mr Rotich on Wednesday told the Business Daily that the Treasury, the Kenya Revenue Authority (KRA) and the brokers had agreed that the task of accounting for the tax be left to investors — not the market intermediaries.

“We are working on legislation that will require individuals filling their tax returns to account for CGT [capital gains tax],” Mr Rotich said, adding that any other challenges that the brokers may have with the tax would be resolved through next year’s Finance Bill.

Martin Kisuu, a tax expert with Taxwise Consulting Limited, welcomed the decision to have investors account for the tax, saying that is the practice in most jurisdictions.

“That is the way it should be because it is being collected under the Income Tax Act, which requires individuals to do self-assessment and file,” Mr Kisuu said, adding that it should not be difficult to enforce because the parties will be dealing with a formal business that has ready information.

“You can actually change the law to require the brokers to submit the information so the fear of non-compliance should not arise.”

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Stockbrokers said their concern has been with both the introduction of the tax and its administration, which had put the burden of accounting for the tax on them.

“This is not an advisable tax to introduce in the capital markets. It is a cumbersome tax and investors, especially foreigners who are not obliged to invest here, want an easy entry and easy exit,” said an investment banker, who did not want to be named because of the government’s strong arm tactics in the ongoing war of words with brokers.

Read more at Business Daily