ICEA Lion Asset Management's chief investment officer Barack Obatsa has urged the government to reconsider the decision to introduce the 0.05 per cent tax on money transfers above Sh0.5 million warning that it will cause capital flight to offshore markets.
Treasury CS Henry Rotich announced the “Robin Hood” tax during the budget speech of the current financial year that got underway on July 1.
Kenya Bankers Association has since challenged the decision in court.
The new money transfer tax will reduce returns of investors and put pressure on fund managers, according to ICEA Lion Asset Management.
Barack Obatsa, the chief investment officer of the Sh125 billion asset management firm, urged the government to reconsider the decision to introduce the 0.05 per cent tax on money transfers above Sh0.5 million warning that it will cause capital flight to offshore markets.
“The transaction tax suggests to us that it is going to significantly reduce the returns of investors,” said Mr Obatsa in a briefing last week.
“When you make it more expensive to transact, it will have negative impact on development of capital markets. It is likely that investors will limit their transactions to minimise the costs that they will incur.”
To complete an investment transaction, Obatsa said, one will probably be taxed four to six times in a single investment cycle. He said that a conservative estimate is that returns for investors will dip by three per cent since it is them who will ultimately bare the cost of money transfers.
