Fresh move to introduce capital gains tax on land, houses, shares
PHOTO | BILLY MUTAI Finance minister Njeru Githae addresses the press after he launched the commencement of trading in new NIC Bank shares at the Nairobi Securities Exchange (NSE) on October 23, 2012. NIC Bank raised Sh2 billion from its shareholders through a rights issue.
What you need to know:
- One of the proposals, Mr Githae said, would be to levy tax on investors who dispose shares, property or other investments within five years after acquisition
- The Treasury has revised its tax revenue target to Sh1 trillion — an increase of Sh130 billion over the target set in June — as the government seeks ways of financing the ballooning State expenditure
- Experts are calling for widening of the tax base to avoid relying on a few companies and sectors to fund the government expenditure
The government is toying with the idea of reintroducing capital gains tax targeting proceeds from sale of land, houses and shares.
Addressing the media during the listing of new NIC Bank shares at the Nairobi Securities Exchange (NSE) on Tuesday, Finance minister Njeru Githae said the ministry is carrying out a study on how best to levy the tax as one of the move to broaden the tax base and also increase revenue.
“We are doing this as we do a proper study on this tax,” he said.
The Treasury has revised its tax revenue target to Sh1 trillion — an increase of Sh130 billion over the target set in June — as the government seeks ways of financing the ballooning State expenditure driven by wage demands and cost of implementing the new Constitution.
One of the proposals, Mr Githae said, would be to levy tax on investors who dispose shares, property or other investments within five years after acquisition.
“If you sell it within five years, then you pay capital gains tax, but if you sell it after five years, then you don’t pay. The basis of that is that the person selling in less than five years is more of a speculative trader than the person holding it, not just for trading but for individual acquisition,” Mr Githae said.
Meanwhile, experts are calling for widening of the tax base to avoid relying on a few companies and sectors to fund the government expenditure.
Addressing this year’s Taxpayers’ Day on Monday, President Kibaki noted that 10 companies collectively remitted Sh115 billion to the taxman, or about a fifth of the country’s total tax revenue.
“The proportion of their taxes to the total collection is worrying. It reflects a situation whereby this country is relying too much on a few tax payers,” said Institute of Economic Affairs (IEA) researcher Raphael Muya.
According to the Economic Survey 2012, 80 per cent of all employed people work in the informal sector.
This is also the fastest growing segment, having created 85.7 per cent of all new jobs in 2011.
Most of these individuals are untaxed.
On the other hand, about 2.2 million Kenyans work in the formal sector. They find it nearly impossible to escape KRA’s grip.
“We have to be more aggressive about expanding our tax base to include individuals and businesses in the informal sector. Right now, very few shoulders are bearing the burden of taxation and this needs to change,” said Ernst and Young tax manager Francis Kamau.
