Kenya govt, firms to face off over new tax on sale of oil blocks
Saturday January 3 2015
An oil rig. Tax experts are already raising the red flag over the disparity in the enforcement of the capital gains tax, saying it would choke the growth of Kenya’s nascent petroleum and mining industry. PHOTO | FILE NATION MEDIA GROUP
Country not yet ready
George Wachira, a director at Petroleum Focus Consultants said, Capital gains tax is good when applied correctly to sectors that are productive and profitable but could be counter-productive if it discourages investments.
“Kenya is yet to become a prolific destination for oil and gas until substantial quantities are discovered. Therefore, any additional tax like the CGT makes the country less attractive for risk capital. It is a different story in Tanzania and Uganda, where there is more certainty in finding large quantities of resources. The recent drop in oil prices makes it even more urgent not to impose CGT as investors will be looking for more government incentives to undertake exploration and production,” he said.
National Treasury Cabinet Secretary Henry Rotich said the tax rates in the mining and petroleum sectors could only be reviewed in the next budget. “That is how it is in the law, but we are still discussing with the industry — both the mining and petroleum — to see if there are any changes that can be addressed in the next Finance Bill. What we agree will be put in the next Finance Bill (2015/2016),” he said.
The government is looking to raise an estimated Ksh7 billion ($76 million) through the new tax measure before the end of the current (2014/2015) fiscal year.