Left Menu
Development News Edition

UPDATE 3-Kenya to raise capital gains tax to shore up revenues

Reuters | Nairobi | Updated: 13-06-2019 23:07 IST | Created: 13-06-2019 22:50 IST
UPDATE 3-Kenya to raise capital gains tax to shore up revenues
Image Credit:

Kenya will more than double its capital gains tax rate to 12.5% from 5% to bring it in line with international standards, Finance Minister Henry Rotich said in budget proposals to parliament on Thursday.

Analysts said the move showed the government had opted to squeeze already hard-pressed taxpayers, rather than cut expenditure, to make ends meet. "They are basically trying to get more and more out of a small tax base," said Kenneth Minjire, head of securities at Nairobi-based Genghis Capital.

The East African economy is one of the fastest growing in the region, expanding by 6.3% in 2018 on the back of a good harvest in a country where farming makes up about a third of output. However, investors have been unnerved by a jump in government debt in recent years, to more than 55% of GDP from 42% in 2013. Rotich said that would fall.

He said some countries, including East African neighbours, had much higher rates of capital gains tax at 20-30%. The tax usually accrues from the sale of assets like land, buildings and machinery. "There is need to review the capital gains tax legislation in order to enhance equity and fairness as well as harmonize the rate with other jurisdictions," the minister said.

"Consequently, I propose to increase the rate of capital gains tax from 5% to 12.5%." He exempted companies undergoing restructuring.

Rotich raised total expenditure nearly 10 percent to 2.8 trillion shillings ($27.6 billion), with more than 40 percent going on government wages and other recurrent expenditures. "What we are really not focusing on is actually reducing the expenditure," said Nikhil Hira, director for tax at Bowman's Coulson Harney LLP, a Nairobi legal practice. "The wastage that we have in our government is huge."

The government will cut its budget deficit in the 2019/20 (July-June) financial year to 5.6% of GDP from 7.4% in the current fiscal year, which ends this month, Rotich said. The funding gap will be filled by net local borrowing of 283.5 billion shillings and 324 billion shillings in net external borrowing, he said.

Rotich also made another proposal to remove a cap on commercial lending rates, after legislators thwarted his attempt last year. The cap was introduced to reduce lending costs and increase access to credit, he said, but instead it starved small businesses of much-needed credit as banks declined any potentially risky loans.

"I will in this year's finance bill be proposing repeal of section 33b (rate cap) of the banking act 2016, I am convinced this will unlock credit to the private sector," he said, adding the growth momentum from last year would continue. "We project growth in 2019 to remain strong at around the same level in 2018."

In neighbouring Tanzania and Uganda, finance ministers have also increased spending, saying they were investing in infrastructure in railways and power generation plants.


TRENDING

OPINION / BLOG / INTERVIEW

Why COVID-19 is unstoppable in USA despite it being ranked at the top of GHS Index?

Several worst-hit countries such as Italy, France, Spain, the UK, Canada, and Russia have peaked COVID-19 cases in April. Almost all of them have gradually flattened the curve. However, the USA is setting new daily records of infections tha...

COVID-19 seems cooking biggest ever global scam

The increasing number of corruption cases on COVID-19 funds from throughout the world and involvement of high profile persons indicate that the countries cant ignore corruption in their pandemic response programs. This has generated the nee...

Health Management Information Systems lack holistic, integrated, and pandemic resilient character

Being a part of the United Nations system, the World Health Organization WHO deserves its share of rebuke for its alleged failure issue COVID-19 health emergency alerts on appropriate time. However, the pandemic has also exposed loopholes i...

Pride in the time of coronavirus: a welcome move online?

This year is different in many ways not least as celebrations are also taking place against the dramatic backdrop of a global health crisis and a resurgence in grassroots activism following the death of George Floyd in Minneapolis. ...

Videos

Latest News

US Navy welcomes 1st Black female Tactical Aircraft pilot

The US Navy has welcomed its first Black female Tactical Aircraft pilot. MAKING HISTORY the US Navy tweeted on Thursday in response to a post that Lt. j.g. Madeline Swegle had completed naval flight school and would later this month receive...

COVID-19: Complete lockdown observed in Kalaburagi

A complete lockdown was observed in Karnatakas Kalaburagi on Sunday due to the rise in COVID-19 cases. The state government has announced a complete lockdown in the state on all Sundays till August 2.Meanwhile, in view of the rising COVID-1...

Former India cricketer Chetan Chauhan tests positive for COVID-19

Former India cricketer and Uttar Pradesh cabinet minister Chetan Chauhan has tested positive for COVID-19. The development of Chauhan testing positive for the dreaded virus emerged late on Saturday night from the tweets of former India play...

Reports: ESPN suspends Wojnarowski over profane email to senator

ESPN suspended Adrian Wojnarowski late Saturday night without pay, according to reports, one day after the NBA reporter sent a profane e-mail to Missouri Republican Sen. Josh Hawley. Outkick was the first to report the suspension while the ...

Give Feedback