The proposals, presented on Tuesday ahead of the 2026 budget-making process, seek to reduce the tax burden on SACCO operations while strengthening the safety of members’ savings and improving access to affordable credit.
At the centre of KUSCCO’s submission is a call for the removal of the 20 per cent excise duty charged on loan processing fees and member account maintenance costs.
The umbrella body argues that such charges unfairly penalise SACCO members and undermine the cooperative model.
According to KUSCCO, SACCOs operate under the doctrine of mutuality, a long-established principle in cooperative law that treats transactions between members and their society as internal arrangements rather than commercial dealings.
“Members pool resources and transact within institutions they collectively own,” the union said, noting that taxing internal fees distorts this relationship and reclassifies mutual transactions as taxable business activities.
The union maintains that the current tax regime raises the cost of credit for ordinary members, many of whom rely on SACCO loans to finance education, healthcare, housing and small businesses.
According to KUSCCO, SACCOs operate under the doctrine of mutuality, a long-established principle in cooperative law that treats transactions between members and their society as internal arrangements rather than commercial dealings.
“Members pool resources and transact within institutions they collectively own,” the union said, noting that taxing internal fees distorts this relationship and reclassifies mutual transactions as taxable business activities.
The union maintains that the current tax regime raises the cost of credit for ordinary members, many of whom rely on SACCO loans to finance education, healthcare, housing and small businesses.
Removing excise duty on intramember fees, KUSCCO argues, would immediately translate into cheaper loans and higher lending capacity across the sector.
Beyond SACCO-specific levies, KUSCCO has also proposed reforms to individual income tax bands.
Beyond SACCO-specific levies, KUSCCO has also proposed reforms to individual income tax bands.
The union wants the government to widen tax brackets and raise the tax-free threshold to reflect rising living costs and inflationary pressures.
It argues that the existing structure places a disproportionate burden on low- and middle-income earners, limiting their ability to save consistently or service affordable loans.
It argues that the existing structure places a disproportionate burden on low- and middle-income earners, limiting their ability to save consistently or service affordable loans.
Revising tax bands, the union says, would make the system more progressive and support household financial stability.
The proposals come at a time when the government is undertaking broad reforms in the SACCO sector following a series of governance failures and high-profile scandals that eroded public confidence.
In response, authorities have introduced stricter oversight measures, including mandatory professional registration for SACCO managers and board members, aimed at improving governance, accountability and transparency.
KUSCCO says tax reforms should complement these regulatory changes by reinforcing SACCOs’ role as safe, member-driven financial institutions rather than profit-oriented entities.
The proposals come at a time when the government is undertaking broad reforms in the SACCO sector following a series of governance failures and high-profile scandals that eroded public confidence.
In response, authorities have introduced stricter oversight measures, including mandatory professional registration for SACCO managers and board members, aimed at improving governance, accountability and transparency.
KUSCCO says tax reforms should complement these regulatory changes by reinforcing SACCOs’ role as safe, member-driven financial institutions rather than profit-oriented entities.
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