Capital Markets

Experts push for extension of Gems tax amnesty to five years

Henry Rotich
Treasury Secretary Henry Rotich. FILE PHOTO | NMG 

The Treasury should raise incentives for firms to list on the growth segment of the Nairobi Securities Exchange (NSE), expert have said.

Treasury Secretary Henry Rotich in the 2019 budget has proposed an amnesty on accumulated penalties and interest on tax arrears for the two years prior to listing for firms joining the NSE Growth and Enterprise Market Segment (Gems).

But tax experts at consultancy PriceWaterhouseCoopers (PwC) say the amnesty should be extended to five years instead to make it more effective.

This would cover the entire period in which KRA is allowed to carry out a tax audit (except in evident fraud cases) on the firms, without leaving those with queries going back longer than two years exposed to penalties.

“Given the five-year statutory limitation period, the CS should have considered extending the tax amnesty to five years prior to listing in order to enhance the effectiveness of the amnesty,” said PwC in a budget review report.


Analysts at investment bank Apex Africa say that policy should also address the presence of private equity (PE) firms in the SME industry, which have become more prominent in recent years as a source of funds.

While PE funds are providing SMEs an alternative to the capital markets in the fund raising stage, they (PE funds) can help push listings by using the stock market when exiting from the investment.

“The provision of capital to SMEs by PE firms will still hold back listings at the bourse. To reverse this, exiting of PE firms through the bourse ought to be encouraged further from a policy standpoint,” said Apex Africa.