Stockbrokers wash their hands of capital gains tax

What you need to know:

  • Analysts have said that the tax would reduce hard currency inflows and weaken the local currency.
  • KRA spokesperson Maureen Njongo said the taxman will issue a status update regarding the implementation of the tax in due course.

Confusion over application of the new capital gains tax continues to play out, with stockbrokers saying they have no obligation to collect the money on behalf of the government.

Speaking to the Nation by phone, Chief Executive of the Kenya Association of Stockbrokers and Investment Banks Willie Njoroge said there is no provision in law that obliges or allows them to collect the tax.

“There is a big misunderstanding in the market that it is the stockbrokers who should be remitting this money. The truth of the matter is that the investor is actually the one supposed to file the returns,” said Mr Njoroge.

Kenya Revenue Authority spokesperson Maureen Njongo said the taxman will issue a status update regarding the implementation of the tax in due course.

Mr Njoroge said stockbrokers will continue doing business as usual as they await clear guidance from the government. However, he said the tax on securities should have been thought through thoroughly before implementation.

A CGT of five per cent became effective on January 1 this year as a strategy by the government to raise money to meet ballooning recurrent and development expenditure, and to support the devolved system of administration.

The government has set an ambitious revenue collection target of Sh1.18 trillion this financial year, putting pressure on the taxman to meet the mark.

The tax was abolished 30 years ago to allow the real estate and the securities market to thrive. Before it was outlawed in 1985, it imposed a 30 per cent charge on the net accruing from sale of shares and property.

Analysts have said that the tax would reduce hard currency inflows and weaken the local currency. This is due to the fact that foreign investors, who constitute over 55 per cent of those in the stock market may look for alternative markets where they are exempt from the tax.

Currently, the shilling is trading at 90 against the US dollar.