Government urged to zero-rate tax on Sacco dividends

Newly introduced taxes on Sacco members’ dividends may discourage people from joining cooperative societies.
Amica Sacco Chief Executive Officer Mr. James Mbui has said the increase of the tax from five to 10 percent has drastically slashed net dividends payable to members with some opting not to continue saving with their societies.
Mbui who was speaking during the Sacco’s Annual General Meeting held in Murang’a town on Thursday noted that members of cooperative societies save what they are left with after other taxations.
Taxing dividends, the CEO observed, will be painful for Sacco members who are shouldering taxes from other quotas.
“For instance, most members of our Sacco are farmers. The farmers start paying taxes after selling of their produce and even during the process of marketing. The little money they are left with they save in the Sacco to assist them access loans which are also taxed. It’s my appeal to the government to totally remove tax on members’ dividends,” asserted Mbui.
The new tax on dividends began to take effect in January and many members of cooperative societies are not aware of the new rates.
“As cooperative societies we have to comply with the new rates but our members are not happy with the taxes which have seen their dividends reduced,” he added.
Meanwhile, Amica Sacco which has branches in all the Mount Kenya counties and Nairobi in 2018 registered 30 percent growth on revenue.
The Sacco attributed the impressive growth on revenue to introduction of alternative business channels, aggressive loan collection and attractive products and services.
Mbui noted that there are plans to begin offering services in digital platforms with the objective to attract young people to join the cooperatives.
After introduction of digital platforms to offer services, Mbui noted that the Sacco has reduced its operation costs easing members the hustle of going to branches to access services.
“We have improved ways of accessing services through mobile phones. This has helped us to reduce operation costs and has also helped us to tap into more youthful membership as well as the diaspora market,” added the CEO.
He further said they are targeting to recruit macadamia and avocado farmers as their members saying the two sectors are currently doing well in the country.
“Majority of our members are tea and coffee farmers, but there are other upcoming lucrative sectors including macadamia and avocado and we want to recruit the farmers to be our members as we greatly support farming in the country,” noted Mbui.
By Bernard Munyao