The Star (Nairobi)

16 October 2013

Kenya: Exempt Small Saccos From 10 Percent Excise Duty

editorial

KENYA'S 5,000 Savings and Credit Co-operative Societies are protesting the new 10 per cent excise duty in the Finance Act 2013.

The Kenya Union of Savings and Credit Cooperatives argues that the new tax will undermine the estimated Sh400 billion of savings held in saccos.

Saccos are the main savings vehicle for poor people in Kenya. They offer loans to people who would be denied them by banks with just a guarantee from another sacco member.

Sacco loan interest is fixed at an affordable 12 per cent interest. Furthermore saccos return any profits to their members as a dividend of up to 8.5 per cent interest.

Government would be foolish to undermine this self-help system that is generating about 33 per cent of national savings.

Having said that, many saccos are now operating almost like banks, by receiving salaries and providing other financial services.

The National Treasury understandably feels that they should then be treated like banks, and pay the 10 per cent excise duty on financial transactions

The way forward should be to distinguish between old fashioned saccos who just do loans and savings, and the new bank-style saccos. The former should be exempted, the latter should pay the excise duty.

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