The Nairobi Security Exchange (NSE) traders face heavy penalties if they go ahead to suspend trading at the bourse as they do not have any legal authority.
The CMA steered into action after the Kenya Association of Stockbrokers and Investment Banks (KASIB) resolved to suspend trading at the NSE because of the re-introduction of capital gains tax.
KASIB intended to stop trading at the Nairobi bourse for 19 days stopping local and foreign investors from buying or selling shares.
The bourse stood to lose a daily turnover of about 1.2 billion Kenyan shillings.
Following this directive from the CMA, KASIB issued a statement saying, “The Council of KASIB makes reference to an earlier communiqué relating to discussions at a Council meeting held in the morning of February 19, 2015.”
“Following consultations, and in the interest of maintaining the sanctity and stability of the capital markets in Kenya, the Council of KASIB has further resolved that they shall not suspend trading services and that the Exchange shall operate as normal on February 20, 2015.”
Since its introduction, the capital gains tax has stirred an uproar in the Kenyan market this is after nearly three decades of being shelved away. The tax is currently in motion at a relatively benign rate of 5 per cent as the tax on the gain made on transfer of property which includes land, buildings and marketable securities.
However, the re-introduction of the tax to raise revenues to meet Kenya’s ballooning recurrent and development expenditure has caused a slowdown in the stock market.
Nonetheless, the rate of the 5 per cent capital gain tax is much lower and favourable compared to Kenya’s neighbouring countries. In Uganda, the government charges a capital gains tax of 30 per cent on property while Tanzania’s charges 20 per cent on foreigners and 10 per cent on locals.