New tax will hurt savers, experts say
The so-called Robin Hood taxes on transactions of Sh500, 000 and above will hurt poor savers, financial experts have warned.
Appearing yesterday before the National Assembly Committee on Finance and National Planning, various financial and tax experts warned that if enacted, returns for small savers in collective investment schemes, popularly known as unit trusts, would decline by between three and five per cent.
A Robin Hood tax is a tax aimed at redistributing resources in order to achieve greater social equality, especially a proposed tax on transactions made by financial institutions.
Britam Asset Managers Chief Executive Kenneth Kaniu told the committee whereas most of the savings made by individuals do not amount to Sh500, 000, they are normally aggregated under a single account of millions of shillings.
“If a small investor won’t get a return of 10 per cent, it will come down by between three and five cents,” he said.
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“This would surely kill the morale of savers,” said Mr Kaniu, who is also the chairman of the Association of Collective Investment Schemes. He said some savers might decide to let the money sit idle in the current account.
Another expert said the definition of the transaction was not very clear.
“We actually do not know whether by transactions they mean cheques, cash withdrawals, loan transactions or only deposits,” Peter Kinuthia, a tax partner at audit firm KPMG, told the committee chaired by Kipkelion East MP Joseph Limo.
Instead, the experts proposed for the Government to increase the 10 per cent duty charged by financial institutions on transactions to 12 per cent.
“We have estimated that the Government would raise Sh4.2 billion which is more than what they would raise from Robin Hood taxes,” said Kaniu.
Moreover, they noted that people making a tax payment of a sum bigger than Sh500, 000 might end up being double taxed as the provision, currently, in the Finance Bill, 2018, is not very clear on this.
They noted that normally money channelled through collective investment schemes goes through at least five stages, all of which would attract a tax of 0.05 per cent.