House budget committee mulls introduction of capital gains tax

What you need to know:

  • Although it is not on the Finance Bill, the Budget team could, in the collaboration with the Finance, Trade and Planning Committee, have Capital Gains Tax made part of the Bill.
  • Investors at the Nairobi Stock Exchange would also be taxed for the profits they make when they sell shares.
  • Also proposed by the Parliamentary Budget Office is the reinstatement of the excise tax remission on Senator Keg beer.

Capital Gains Tax might be re-introduced following a recommendation by a parliamentary committee.

The tax on profit made from the sale of shares and property would be making a comeback after it was scrapped in 1985. At the time, the rate was 30 per cent.

Members of the budget committee, led by the Rev Mutava Musyimi, said it was time the government reintroduced the tax to help it raise over Sh8 billion in new taxes.

This is expected to prevent “speculative cabals” involved in speculative land-buying to the extent that current real estate prices do not reflect the true value of the property.

Investors at the Nairobi Stock Exchange would also be taxed for the profits they make when they sell shares.

MAKING BILLIONS
“People are buying land very cheaply and in five years they make billions. We need to make sure that this money from land changing hands from one person to another is taxed so that we avoid this speculation,” Kitui Central MP Benson Makali Mulu noted during the debate in Parliament Thursday.

But Mr Dennis Kariuki Waweru (Dagoretti South, TNA) said taxing profits from the stock exchange would scare away foreign investors.

“International capital is very sensitive to such a thing,” said Mr Waweru.

He said about 50 per cent of traders at the securities exchange were foreigners who could very easily leave Kenya.

“I don’t have an issue with land because the people who have colonised land in Isinya, Machakos and all the way to the beach plots need to pay that tax,” said Mr Waweru.

MAKE PART OF BILL

Although it is not on the Finance Bill, the Budget team could, in the collaboration with the Finance, Trade and Planning Committee, have Capital Gains Tax made part of the Bill.

Also proposed by the Parliamentary Budget Office is the reinstatement of the excise tax remission on Senator Keg beer.
The price of the cheap beer manufactured by East African Breweries has doubled and consumption reduced from 20 million litres a month to about three million litres after the tax remission was removed.
Already, the brewer has held meetings with the Finance Committee, which is expected to agree with the Budget team before an amendment to the Finance Bill is made.