Dar es Salaam Stock Exchange (DSE) has made an impassioned appeal to government to reconsider the proposal to introduce capital gain tax on share as it will scare away investors and hence hamper growth of the exchange.
The DSE Chief Executive Officer, Moremi Marwa, told the ‘Daily News’ that investors to the fledgling bourse would opt to other markets in the region where gains on shares are not taxed.
He said by extension it would be counterproductive to the government agenda to boost industrialization through private investments as it would scare away investors who are interested to venture in industries.
According to him, capital markets are one of a key platforms where an industrialist can access a capital of a long time nature unlike commercial banks.The new tax on stocks wealth will only help chasing investors away to other exchanges in the region where gain on shares are not taxed,” Mr Marwa said.
The DSE, according to him, is at nascent stage and authorities could concentrate on increasing the bourse activities to better economic development, bring more companies to list.
Mr Marwa said: “We should learn from Kenya where they scrapped off withholding and capital gain taxes as the bourse activities were plummeting rapidly.” Kenya tried to introduce the same 2014/15 budget.
The mere announcement crashed the market by 40 per cent. When the implementation started in 2015 the Nairobi Securities Exchange plummeted by 70 per cent in a single month. “They ended up reversing the decision from January (2016)”, Mr Marwa told ‘Daily News’.
Stock experts feared that if NSE, which is 60 years old, failed to absorb the shocks to crash 70 in a month, what would happen for DSE which is about 20 years. The CEO said “even securities transaction tax (STT) imposed on India exchanges is not good for DSE.... we should come with innovative way to increase productivity at the exchange.”
Stock brokers feared that the negative impact on the bourse if the government sticks its gun on wealth on share that may result into a ‘bourse-run’ as other exchanges in the region don’t have such revenue.
And the outcome may negatively impact the industrialisation efforts since the country has a single development bank which cannot suffice the entire drive. Recently, Tanzania Stock Exchange Brokers Association (TSEBA) had advised treasury to halt new tax proposal on capital gain on share and instead introduce STT like India did.
The association, in its letter to minister of finance and planning, said the capital gain tax would impact negatively DSE activities while devastating campaign to woo more participants.
Daily News
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