Kenyans in Savings and Credit Cooperative Societies (SACCOs) could soon benefit from lower taxes should the National Treasury adopt the proposed policy changes submitted by the Kenya Union of Savings and Credit Cooperatives (KUSCCO).
KUSCCO submitted comprehensive tax reform proposals to the National Treasury on Tuesday, January 6, aimed at protecting members and easing the cost of living ahead of the 2026 budget cycle.
In the proposal, KUSCCO seeks the exemption of members from the 20 per cent excise duty charged for loan processing and member account maintenance fees.
The cooperatives' umbrella body argued that applying excise duty to the fees charged by SACCOs to their own members violated the doctrine of mutuality.
According to KUSCCO, under the doctrine of mutuality, transactions between SACCOs and their members are internal dealings rather than commercial transactions.
"SACCOs function under the doctrine of mutuality, where members pool resources and transact within a cooperative they collectively own," KUSCCO noted.
Adding, "Imposing excise duty on intramember fees fractures the identity between contributors and beneficiaries and re-characterises mutual dealings as a taxable trade, contrary to settled doctrine."
KUSCCO maintained that the excise duty is often passed on to members, raising the cost of credit and undermining SACCOs’ ability to provide affordable financial services.
In its proposal to the National Treasury, KUSCCO also called for widening the individual income tax bands so that the tax-exempt threshold can be increased.
KUSCCO argued that the widening of the tax bands will make the current tax bands more progressive to cushion low-income earners in the wake of rising cost of living and inflation rates.
The latest proposed changes by KUSCCO come against the backdrop of sweeping reforms of SACCOs by the government to restore public trust following a series of high-profile scandals involving SACCO bosses.
Among these reforms is the mandatory professional registration of SACCO bosses, a move that is aimed at introducing accountability among SACCO leaders to ensure transparency in the operations of the Credit Cooperatives.
