Stockbrokers seeking ways to implement Treasury's new tax

The stockbrokerage and investment banking fraternity plans to engage Treasury, the Kenya Revenue Authority and other stakeholders over the recently introduced 0.3 per cent withholding tax to be charged on all share transactions at the bourse.

The new levy on share trading was introduced by National Treasury Cabinet Secretary Henry Rotich while presenting the 2015/16 Budget in Parliament two weeks ago.

“We are going to initiate dialogue and more constructive discussions to find out the best methodology to use in implementing this new transaction tax,” said Nairobi Securities Exchange (NSE) Chief Executive Officer Geoffrey Odundo.

Odundo made these remarks on the sidelines of NSE’s 61st Annual General Meeting (AGM) held at the Bomas of Kenya Nairobi yesterday.

Rotich said during his budget presentation that the Government reinstated Capital Gains Tax last year so as to allow property and share owners to make their fair contribution to the exchequer.

“However, implementation of the law has faced some challenges in some sectors of the economy. In order to address these challenges and ensure enforceability and compliance, I propose to remove the five per cent tax on capital gains arising from sale of shares and introduce a 0.3 per cent withholding tax on the transaction value of the shares,” he said.

Kenya Association of Stockbrokers and Investment Banks (KASIB), a lobby group for stock brokers and investment bankers, had resisted the Capital Gain Tax, which ended up in the court of appeal, before Treasury bowed to pressure and scrapped it completely when it presented this year’s Budget. During yesterday’s shareholders meeting, the embattled former Uchumi Supermarket CEO Jonathan Ciano who was one of the NSE directors, was due for re-election. However, he offered to stand down from this position and did not offer himself to serve another term at the board.

Final dividend

NSE directors recommended the payment of a first and final dividend of Sh0.38 per share amounting to Sh74 million, compared to Sh2 per share or Sh49 million paid out in 2013.

The Nairobi bourse is holding its first AGM this year after listing in 2014 following a demutualisation process where stockbrokers relinquished ownership of the exchange and become a public company. “We are working on a pipeline of new investment vehicles going forward given that this market is now getting more sophisticated, hence the need to broaden it,” said Odundo.

The listings of new financial product ranges that will soon be introduced include derivatives, real estate investment trusts (REITS) and exchange traded funds.

“We also want to encourage listing of more small and medium-sized enterprises, based on a study we have undertaken to establish various factors inhibiting the entry of such firms to the bourse,” explained Odundo.

The NSE has set a goal of increasing the number of listed firms from the current 64 to 100 companies and pushing the total market capitalisation from Sh2.4 trillion to Sh4 trillion over the same period.