Kenya to revoke controversial mining tax

Posted on : Tuesday , 20th January 2015

Less than a month after Uhuru Kenyatta was sworn in as Kenya's new president, his administration is planning to revoke rules passed in 2012, which impose 35% local equity shareholding in the country’s mining licences, reports Business Day.

Unlike most African governments, Kenyatta’s is not seeking larger ownership stakes in foreign miners with the upcoming mining bill, which will eventually replace the existing, obsolete Mining Act of 1940 later this year.

Instead, reports Business Day, the new rules will substitute the high local equity obligations with a 10% "free carry" investment by the government in all miners with operations in Kenya.

In an effort to address its budget deficit, the previous government introduced in February a withholding tax on the gross proceeds from share or property transfers in the extractive sector.

While the government's 2012 finance bill initially proposed to re-introduce a capital gains tax for the transfer of shares or property, it was later replaced by a withholding tax.

In 1985, Kenya had suspended its capital gains tax to encourage savings and investment.

According to the World Bank, Zambia’s neighbourhood —sub-Saharan Africa— is already both the most onerous and most aggressive tax region in the world, requiring an average of 39 separate payments and 319 hours per year to complete processes in accounting for an average rate of 57.8% of profits.

The continent’s revenue authorities also feature regularly at or near the top of surveys of its most corrupt institutions – with aggressive investigations of alleged arrears often used as a pretext for bribery demands.