Politics and policy
Justice Isaac Lenaola on Tuesday gave the Kenya Association of
Stockbrokers and Investment Bankers (Kasib) and the Kenya Revenue
Authority (KRA) a week to strike a deal. PHOTO | FILE
By BRIAN WASUNA, bwasuna@ke.nationmedia.com
In Summary
- Justice Isaac Lenaola on Tuesday directed that the Kenya Association of Stockbrokers and Investment Bankers (Kasib) negotiate with the Kenya Revenue Authority over implementation the capital gains tax and return before him on February 3.
- Kasib and KRA told the judge that they had engaged in fruitful talks since the stockbrokers moved to court, and that a deal could be in the pipeline.
- While KRA is considering relaxing the provisions, stockbrokers are seeking a shelving of the amendments compelling them to collect the capital gains tax entirely.
Stockbrokers have been given one week to negotiate
with the taxman over implementation of the re-introduced capital gains
tax that has been the cause of a three-week stalemate between the two.
Justice Isaac Lenaola on Tuesday directed that the Kenya
Association of Stockbrokers and Investment Bankers (Kasib) negotiate
with the Kenya Revenue Authority and return before him on February 3 to
either record a consent or commence preparations for trial.
Kasib and KRA told the judge that they had engaged
in fruitful talks since the stockbrokers moved to court, and that a deal
could be in the pipeline.
The new laws were assented into law on January 1.
The new laws were assented into law on January 1.
If implemented, they will see Nairobi Securities
Exchange (NSE) investors pay a five per cent tax on gains made from any
share sales at the stock market.
The levy also applies to sale of other property such as land, treasuries and private equity.
The tax was suspended in 1985 in a bid to attract more investors to the Nairobi bourse and ease land transactions.
The court was expected Tuesday to rule on whether
or not to issue any orders regarding implementation of the tax, but
Kasib and KRA instead convinced Justice Lenaola to adjourn the matter
and give them time to strike a deal.
“Let the parties discuss the matter and take
directions or record a consent before Lady Justice Mumbi Ngugi on
February 3,” Justice Lenaola said.
The negotiations come just a day after KRA boss
John Njiraini announced that the capital gains tax could be deferred so
as to iron out the contentious issues that have been at the heart of the
stalemate with the stockbrokers.
While KRA is considering relaxing the provisions,
stockbrokers are seeking a shelving of the amendments compelling them to
collect the capital gains tax entirely.
KRA had initially stuck its ground on
implementation of the law, but Mr Njiraini’s statement will come as
relief for them as it could pave the way for reaching a middle ground on
the dispute.
The new laws have caused panic among stockbrokers,
who argue that implementation of the tax could drive activity down, as
it did in Zimbabwe.
“One emerging securities exchange which imposed a
transactional-based capital gains tax is Zimbabwe. After the
introduction of this tax, the total market capitalisation of the
Zimbabwe Securities Exchange has fallen from approximately $15 billion
to less than $5 billion,” Kasib warns.
Stockbrokers insist that the law is too vague to
implement as it is not clear on several issues, including the rate of
taxation.
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