Kenya: Kenya Revenue Authority and Stockbrokers might settle their differences on capital gains tax (CGT) out of court after their lawyers said they would file an agreement immediately negotiations are completed.
In a consent by both parties before High Court judge Isaac Lenaola, KRA and Kenya Association of Stockbrokers and Investment Bankers (Kasib) agreed that they would negotiate and come up with a deal on the contentious law that had prompted the brokers to seek redress.
"By consent let the parties discuss and take directions, record consent before Justice Mumbi Ngugi on February 3, 2015,'' the agreement between KRA and Kenya Association of Stockbrokers lawyers read in part.
Kenya Revenue Authority Commissioner General John Njiraini had on Monday intimated that CGT implementation could be deferred to a later date to allow a window for negotiations between the institution and the brokers.
"We are thinking of the available options to deal with the matter. We realise there are issues to be dealt with. Deferring the matter is on the cards," he said.
The tax man had initially stuck its ground on implementation of the law, but Mr Njiraini's statement will come as relief as it could pave the way for reaching a middle ground on the dispute.
The centre of the dispute between the taxman and the brokers is the introduction of five percent tax on transactions gains in which the brokers in their case argued that the reintroduction of this was affecting negatively capital market trading.
If the Finance Act section 10 (a) and section 23 sees the light of day investors are expected cash in five per cent of any gains realised from the trade of shares and the brokers are expected to act as agents of Kenya Revenue Authority.
However, the brokers argue that there are conflicting clauses as one demands collection of 7.5 and the other 5 per cent deduction. They claimed in their suit that the compulsory calculation and submitting the tax was impossible as the whole law was confusing.
The brokers are seeking to have the law removed on grounds that it would subject investors to double taxation and was against the constitution. It was their claim that trading had dropped by 70 per cent in the Nairobi bourse since the introduction of capital gains tax.
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