Paul Richardson Nairobi
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.
“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 discussions 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