Stockbrokers argue that the implementation of capital gains tax could stall activity at the Nairobi Securities Exchange. PHOTO | FILE
What you need to know:
The Kenya Association of Stockbrokers and Investment Bankers (Kasib) filed a suit against the taxman last month, asking the court to order suspension of the tax citing difficulties over implementation of the levy.
KRA boss John Njiraini had last week announced that the taxman was considering suspending the laws until the contentious sections of the Act are resolved.
The collapse of the talks however mean that only the court can stop KRA from collecting the levy.
The Kenya Revenue Authority (KRA) has over the past week been engaged in negotiations with stockbrokers aimed at striking a deal that would see the Kenya Association of Stockbrokers and Investment Bankers (Kasib) withdraw a suit it filed in court seeking to stop re-introduction of the tax.
The capital gains tax will see sellers of property, including investors at the Nairobi bourse, part with five per cent of any gains made on the transfer of assets.
Kasib filed a suit against the taxman last month, asking the court to order suspension of the tax citing difficulties over implementation of the levy.
The brokers also argue that its implementation could stall activity at the Nairobi Securities Exchange.
Lady Justice Mumbi Ngugi on Tuesday set February 12 for hearing of Kasib’s petition and directed the parties to file their respective responses before then.
“As the parties have been unable to resolve the matter, Kasib and KRA are to file their arguments by February 11. Hearing will be on February 12,” Justice Ngugi said.
KRA boss John Njiraini had last week announced that the taxman was considering suspending the laws until the contentious sections of the Act are resolved. The collapse of the talks however mean that only the court can stop KRA from collecting the levy.
The taxman has in its response said that the levy was introduced to seal a loophole that allows people to use the securities exchange to avoid and evade tax.
“When capital gains are not taxed taxpayers have an incentive to shift assets from income bearing to assets that produce capital gains, eroding the tax base. Absence of capital gains is also likely to lead to the development of complex schemes to convert income to capital gains to avoid taxation,” KRA holds.
KRA further argues that the concerns stockbrokers have expressed over the calculation of the tax on behalf of their clients are administrative and can be worked on even as the new laws are in effect.
Kasib has in its application said that only 19 firms are licensed to act on behalf of investors in the securities exchange, hence expecting them to calculate taxes due for over 3,000 transactions daily is unfair.
The taxman however believes the issue can be resolved, and claims it has set up a team to address such issues.
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