Kenya asked to post­pone cap­i­tal tax

The Star Early Edition - - BUSINESS NEWS - Paul Richard­son

THE NAIROBI Se­cu­ri­ties Ex­change (NSE) had asked Kenyan au­thor­i­ties to de­fer the in­tro­duc­tion of a cap­i­tal gains tax next year be­cause it might de­ter for­eign in­vestors, act­ing chief ex­ec­u­tive An­drew Wachira has said.

The bourse made sub­mis­sions to the Kenya Rev­enue Au­thor­ity and the Fi­nance Min­istry over the past two months, “ag­gres­sively lob­by­ing” for the levy to be put on hold, Wachira said in an in­ter­view on Tues­day at a stock ex­change con­fer­ence in Diani, Kenya.

For­eign in­vestors had ex­pressed con­cern that there was a lack of clar­ity about how the tax would be ad­min­is­tered, he said.

“The pro­vi­sions of the cap­i­tal gains tax are first and fore­most very un­clear, es­pe­cially with re­gard to listed se­cu­ri­ties,” Wachira said.

“The in­tro­duc­tion of a cap­i­tal gains tax, es­pe­cially when the mar­ket is start­ing to grow, may not be ad­vis­able at this stage es­pe­cially for a mar­ket of our size and given the pro­jec­tions we have.”

Kenya will in­tro­duce the 5 per­cent tax on Jan­uary 1 as part of its ef­fort to fund in­fra­struc­ture projects.

The coun­try is rais­ing more taxes to help Pres­i­dent Uhuru Keny­atta ful­fil his elec­toral-cam­paign pledge to build a sec­ond in­ter­na­tional port in Lamu, dou­ble the net­work of paved roads to 24 000km and build a rail­way from the re­gion’s largest har­bour in Mom­basa to the Ugan­dan bor­der to boost trade.

The plan to im­pose the tax on oil dis­cov­er­ies was “to­tally wrong”, said Ai­dan Heavey, the chief ex­ec­u­tive of Tul­low Oil, the Bri­tish oil pro­ducer that found oil in Kenya two years ago.

The Kenyan ex­change’s am­bi­tions to in­tro­duce new prod­ucts and list­ings next year might be un­der­mined by the tax, Wachira said.

The pro­vi­sions of the cap­i­tal gains tax are very un­clear, es­pe­cially with re­gard to listed se­cu­ri­ties.

“If we are talk­ing about new prod­ucts and we ex­pect the ex­change to be a con­duit for for­eign in­flows, es­pe­cially for new list­ings, we will be dis­suad­ing for­eign­ers from com­ing,” he said.

“The Kenya Rev­enue Au­thor­ity is the im­ple­ment­ing or­gan­i­sa­tion and they have been gra­cious enough to in­form us that we shall be hav­ing dis­cus- sions around this. Hope­fully they will be able to de­lay im­ple­men­ta­tion.”

The Kenyan ex­change, based in the cap­i­tal, Nairobi, ex­pects at least 12 com­pa­nies to be­gin trad­ing next year, with as many as 10 of them de­but­ing on the growth en­ter­prise mar­ket seg­ment for small- and medium-sized com­pa­nies.

The mar­ket, in­tro­duced in Jan­uary 2013, had three listed com­pa­nies, with one more ex­pected by year-end, Wachira said.

“We have recog­nised that mid-sized com­pa­nies are the driv­ers of our econ­omy,” Wachira said.

The bourse was plan­ning an ed­u­ca­tion and mar­ket­ing cam­paign next year to at­tract more com­pa­nies seek­ing to raise cap­i­tal.

Other plans for next year in­cluded a plat­form to en­able Kenyans to trade shares us­ing their cell­phones, real es­tate in­vest­ment trust de­riv­a­tives and the in­tro­duc­tion of spot and fu­tures com­modi­ties trad­ing for Kenyan farm­ers, Wachira said – Bloomberg

PHOTO: BLOOMBERG

The Nairobi Stock Ex­change is plan­ning an ed­u­ca­tion and mar­ket­ing cam­paign next year to at­tract more com­pa­nies seek­ing to raise cap­i­tal.

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