The Kenya Union of Savings and Credit Co‑operatives (KUSCCO) has formally submitted the sector’s consolidated recommendations on the Finance Bill 2026/27 to the National Assembly, warning that poorly aligned tax measures could destabilise cooperative finance and burden households already grappling with rising living costs.
At the heart of the submission is opposition to taxing internal SACCO transactions, which KUSCCO argues would raise borrowing costs and weaken liquidity support mechanisms.
In the submission signed by Arnold Munene, Managing Director of KUSCCO, the union cautioned that ignoring the Central Liquidity Facility (CLF) framework under the Sacco Societies Act creates a direct conflict between prudential regulation and tax law, undermining systemic stability.
“If these transactions are subjected to adverse tax treatment, SACCOs will be disincentivized from participating in liquidity support mechanisms, weakening the sector’s resilience and increasing the risk of contagion during periods of financial stress,”
The Kenya Union of Savings and Credit Co‑operatives (KUSCCO)
KUSCCO warned that such misalignment could trigger liquidity crises, higher default rates, and erosion of public confidence in SACCOs as safe financial intermediaries.
The union further argued that failure to harmonize the Income Tax Act with the Co‑operative Societies Act and the Sacco Societies Act would create operational distortions, compliance dilemmas, and potential litigation. These contradictions, it said, discourage investment in cooperative finance, slow sectoral growth, and undermine Kenya’s broader economic transformation agenda.
Among the proposals, KUSCCO is calling for amendments to Section 19A of the Income Tax Act to provide uniform tax treatment for all types of cooperative societies, regardless of membership structure. The union emphasized that SACCOs whose membership includes individuals, groups, and corporate entities should be treated equitably to avoid disincentivising their formation and operation.
KUSCCO also urged Parliament to expand the definition of “designated primary co‑operative societies” under the Income Tax Act, preserve legal protections that prevent the Kenya Revenue Authority from issuing agency notices where appeals have been properly lodged, and amend the Excise Duty Act to exclude fees, charges, and commissions earned by SACCOs from their members.
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In addition, the union proposed widening individual income tax bands and raising the tax‑exempt threshold to ease the burden on low‑ and middle‑income earners. It noted that Uganda has exempted SACCOs from paying taxes on their incomes between July 2017 and June 2027, a policy designed to encourage formal savings and strengthen cooperative finance.
KUSCCO stressed that Kenya must adopt policies that protect SACCOs and promote financial inclusion, warning that failure to align tax policy with cooperative legislation does not merely create technical anomalies but threatens systemic stability, socio‑economic progress, and the confidence of millions of members nationwide.
The union’s full set of recommendations is available at https://tinyurl.com/4rvxvkct
By Masaki Enock
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