Githae mulls taxing mineral explorers

October 23, 2012
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Finance Minister Robinson Njeru Githae. Photo/ FILE

, NAIROBI, Kenya, Oct 23 – The government is mulling imposing Capital Gains Tax (CGT) on oil companies, mineral firms and prospecting companies to curb speculation on discoveries made on Kenya’s natural resources.

Finance Minister Njeru Githae said the new provisions are in the Finance Bill to ensure the government is able to benefit from the resource finds by foreign firms.

“A company pays Sh3,000 for a prospecting license, the moment it strikes something it sells it shares to other investors, but the government does not benefit anything. They discover and don’t even tell us,” he said.

He added that the government is awaiting a study that will be complete by the end of this financial year to guide it on how to impose CGT.

“We are doing a proper study looking at other countries that impose Capital Gains Tax. We have until June next year to make that decision,” Githae said.

CGT that was suspended 25 years ago could boost tax revenue collection domestically, especially as Kenya develops its nascent oil sector.

Kenya’s regional counterparts such as Uganda received 15 percent of its tax revenue from CGT last year.

Some countries impose CGT on second acquisition on investment exempting the first purchase, while others impose the tax depending on the number of years an investment such as property has been in the possession of an owner; sale of it before five years for instance would incur the tax.

Githae said those are some options the government is reviewing in the study.

The state has been urged consider CGT to boost tax revenue. On Monday Githae revealed that the Kenya Revenue Authority had a target to collect Sh1 trillion in the coming financial year.

KRA collected Sh707.4 billion for 2011/12 financial year just Sh10 billion shy of its revenue target for the year.

The country faces upward wage reviews and devolution in the coming year that will demand a significant amount of revenue to maintain.

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