Cooperatives Cabinet Secretary Simon Chelugui, on Friday, announced plans to amend the Cooperatives Act to remove taxes on dividends for Savings and Credit Cooperative (SACCO) members.
Speaking during the Kenya National Police Sacco annual meeting, Chelugui stated that he was already in contact with Treasury CS Njuguna Ndung’u to address the matter.
According to the Cooperatives CS, taxing Sacco dividends resulted in double taxation since the government also deducted some money from members' salaries.
“The matter is before the Treasury and I have received several petitions from SACCOs. They have raised legitimate concerns and I have engaged my colleague Prof. Njuguna Ndung’u on the same and for sure there is double taxation,” Chelugui admitted.
It was also noted that tax on dividends also discouraged Kenyans from joining the Saccos while others were opting out due to the levies.
To encourage Kenyans to register with Saccos, Chelugui pledged to include the tax amendments in this year's finance bill.
He added that the government would also introduce a Deposit Guarantee Scheme (DGS) to compensate members when the society is unable to meet its financial obligations.
"The Deposit guarantee schemes will also formulate regulatory policies and implement an instructive framework that will empower cooperatives and SMEs,” Chelugui noted.
"The Treasury CS (Njuguna Ndung'u) has assured me that in the next finance bill, we will be able to address this concern," he added.
Cooperatives, nonetheless, were urged to reevaluate themselves against National Average Performance in a bid to seek areas of improvement.
In 2019, the government introduced a new raft of tax measures aimed at streamlining the operations of SACCOs, among them was the increment of the tax on dividends.
The new law doubled taxes on members’ dividends from five to ten per cent with the Kenya Revenue Authority (KRA) taking away 20 per cent of the money.
