Much as the government is under pressure to increase tax collection as part of its strategy to avoid expensive loans, it must take due care to ensure taxation measures do not overburden economic actors.

For instance, Treasury officials ought to take into account that raising capital gains tax from the current five to 15 per cent could further depress the stock exchange, which is already reeling from subdued activity. 

It is important, therefore, for tax policy makers to engage players in the economy before introducing new measures that could be interpreted as bad for business at a personal level and economic growth at the national level.

Given that the economy is still in recovery mode, what is needed, more than anything else, are measures that will stimulate economic activity and get Kenyans generating wealth so that they can increase the flow of money and, in turn, spur job creation.

Since there are more Kenyans likely to come into the tax bracket going forward, the trick should be to strike a balance that will ensure equitable distribution of taxes, so that no one class of taxpayers feels they are carrying a disproportionately larger burden. This is especially critical in the property market as well as the stock exchange, both of which are still seeking ways to recover from a two-year slump caused by Covid-19 and uncertainties arising from the August, 2022 elections. Already, there are too many small-scale investors with dormant CDSC accounts, meaning that although they would like to trade at the stock market, they lack the disposable income they need to invest. 

What can be done to get them trading again? That is the question policy makers should be asking even before they raise capital gains tax, because if they can get more people to trade, they will have a broad base from which to collect the tax. The problem is not the tax per se. Rather, it is the tripling of it that is likely to cause jitters, especially in an environment in which nearly half of listed firms have not paid dividends for over a year and the real estate market is facing turbulence due to high interest rates charged on loans and mortgages. One danger is that if investors stay away from these two market segments, or slow down their activity there, it could lead to a contraction of opportunities to create both jobs and wealth. This is something the government ought to look into before imposing the enhanced tax.