The Tax (Amendment) Bill 2020 proposal to introduce Value Added Tax (VAT) on brokerage services, continues to draw sharp reactions from dealers at the Nairobi Securities Exchange(NSE) as well as those in the insurance, coffee and tea auctions.
The bill wants an amendment to the first schedule, number 35 of VAT Act 2013 and introduce the 14 per cent tax on insurance agency, insurance brokerage, securities brokerage services, tea and coffee brokerage.
Stockbrokers, through the powerful Kenya Association of Stockbrokers and Investment Banks (KASIB) is the first to fire a warning shot, promising to pass any extra tax burden to investors at the bourse. KASIB notes that the tax will lead to an increase in the cost of stockbrokerage, which will ultimately be paid by investors.
“This will make investing in shares and bonds quite unattractive to investors, both domestic and foreign,” said KASIB Chief Executive Mr. Willy Njoroge.
Currently, the highest commission chargeable to stockbrokers is 1.78 per cent, which is applicable to amounts up to Sh100,000. Above this amount, commissions are negotiable, subject to a maximum of 1.5 per cent. It is on this commission that the VAT will be levied.
KASIB says the proposed VAT will push investors out of the bourse to search for alternatives. The lobby further warns that the tax will reduce investment in government securities, making it harder for government to meet its debt funding requirements.
10% WTH tax on infrastructure bonds and green bonds
The bill also wants to introduce 10 per cent withholding tax on infrastructure bonds and green bonds, all which are currently tax-exempt.
These new tax proposals come at a time the Capital Markets stakeholders crafted a contingency plan to ensure business continuity at the bourse.
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