Savings and credit co-operative societies have gone to court to challenge a Government plan to increase the tax levied on cash deposits. The Kenya Union of Savings and Credit Co-Operatives Limited (Kuscco) has asked the High Court to stop the increase of the sacco deposit levy from 0.1 per cent to 1.75 per cent.
he union argued that saccos would have to pass the burden to members if the new levy was enforced, making erstwhile affordable loans more expensive.
“An increase in the deposit levy will definitely trickle down to members since it will make it hard for saccos to lend on favourable terms due to the pressure to remit millions of shillings as tax for deposits,” said Kuscco lawyer Joshua Magee. According to Kuscco, bonuses and dividends paid to sacco members on their savings and deposits at the end of each financial year would also be reduced to factor in the new tax rate unless the court intervenes. The increased taxes on sacco deposits was proposed by the Sacco Societies Regulatory Authority (Sasra) in February and approved by the National Assembly in April. The new taxes are scheduled to come into effect from January 2019.
However, Kuscco has submitted that there was no consultation with stakeholders, including the 3,560 registered saccos in the country. According to Kuscco, the increment is punitive and unfair to sacco members who make deposits expecting returns, and a double taxation to the majority who are employed and have their salaries taxed.