Stocks dealers sue over capital gains tax law

Stockbrokers have moved to court opposing re-introduction of the capital gains tax by the government, saying it has created confusion in the money market.

In a suit filed yesterday, Kenya Association of Stockbrokers and Investment Banks wants sections of the Act suspended, pending hearing and determination of the case.

Kasib said the law requires stockbrokers to act as tax agents with respect to the tax, noting that its imposition stands to greatly harm the NSE and stockbrokers’ ability to compete for investment and growth in the modern financial market.

“It is practically impossible to effect the collection and remission of capital gains tax. The eighth schedule as currently drafted seeks to re-introduce paper-based system through the filing of forms in an industry that has evolved over the years,” said Kasib.

Back in 1985, the government used to charge tax payable of net capital gains realised by a person on the transfer of property including securities at a rate of 35 per cent.

It was suspended the same year to encourage investment in the real estate sector as well as spur growth in the securities exchange.

ECONOMIES GO DOWN

Brokers said the route that KRA has taken has seen economies in Africa go down after imposition of the tax, citing Zimbabwe, which has had a commensurate fall in trading volumes as well as investors and companies fleeing the market. They also say they were not involved in making of the law.

“The contradictions and vagueness could have been avoided if Parliament ensured adequate public participation with regard the re-introduction of the tax,” said the group.

The association, therefore, wants sections of that law declared unconstitutional and an order restraining KRA from enforcing it.