The Capital Gains Tax- Boon or Bane: A Case of Kenya

Abstract

This paper assesses the viability of the capital gains taxation in Kenya. Taxation being the only predictable source of government revenue to finance public spending and manage economy regarding economic development. The optimal tax model informs the government of the way to maximize the tax revenue enforcement and collection and promotion of the economic wellbeing. A tax introduced in the system should maximize revenue earning for the government as well as spur economic growth. The re-introduction of the capital gains tax in January 2015 on the capital assets and basing on the gains realized thereafter on the disposal of assets has proved to be productive and persuasive to economic growth. The robust real estate sector and high performing stock market through the Nairobi securities exchange (NSE) has widened the tax net and increased tax revenue collection for the government. It remains an ideal that maximizes revenue as well as promoting economic grow. Moreover, on regional integration perspective, the re-introduction of Capital Gains tax is seen as a step towards bridging the differences in fiscal and tax policies between the East African States by aligning Kenya to its neighboring countries that impose tax on capital gains. With ever increasing merits the capital gains tax should be enforced in our economy.