SACCOs make case for tax exemption

Kampala, Uganda | THE INDEPENDENT | Saving schemes under the Uganda Co-operative Savings and Credit Union Limited have petitioned Parliament challenging the proposed corporation tax on SACCOs.

Government suggested a corporation tax on profitable SACCOs in the financial year 2018/2019. Corporation tax is a tax imposed on the net income of a company.

Sylvester Ndiroramukama, the Chief Executive Officer of Uganda Co-operative Savings and Credit Union Limited appealed to MPs to uphold an earlier decision by parliament to exempt SACCOs from taxation.

In 2017, Parliament approved a proposal through the Finance Ministry to exempt SACCOs from taxes for the next ten years effective July 1, 2017, so as to encourage savings among Ugandans. Ndiroramukama says the reversal of the exemption is retrogressive and will disrupt operations of the SACCOs and the financial system. He was speaking at a public hearing on the proposed taxes, organized by the Finance Committee of Parliament on Wednesday.

He explained that SACCOs play a leading role in mobilizing savings from their members, most of whom cannot access financial services in the formal sector. Ndiroramukama expresses that the reintroduction of taxes will reduce savings with the financial system which will reduce liquidity available for investment and ultimately reduce future taxable incomes.

“SACCOs have already made long-term commitments, including borrowing for on lending to members with the assumption that the larger cash flows resulting from tax exemption will enable them to fulfill their obligations. Cancelling these commitments is not only difficult but will also destabilize SACCOs and undermine their reputation among partners.” he further argued.

He also said that SACCOs are already contributing to the Government’s tax revenue through deducting and remitting Pay as You Earn from employees, Board members and other leaders.

Ndiroramukama was speaking on behalf of 212 SACCOs that signed a petition to Parliament. They included, among others, Wazalendo SACCO, Uganda Bankers’ SACCO, Jinja Teachers’ SACCO, Parliamentarians SACCO, Wakiso Muslim District SACCO, URA Staff SACCO, UNRA Staff SACCO, Entebbe Hospital Workers SACCO and others.

Kwania County MP Tonny Ayo also rejected the proposed tax on SACCO’s arguing that it defeats the spirit of the East African Community.

He said that SACCOs in Kenya were supported first by the government to build capacity and that currently, they give a lot of revenue to the country adding that Uganda should emulate the approach to enable SACCO’s overcome challenges to meet their member’s demands.

Helen Asamo, the representative of Persons with Disabilities (PWDs) in Eastern Uganda wondered why the government was in a rush to remove the exemption on SACCOs hardly one year after parliament made a decision. She together with Koboko North MP Elly Elias Asiku observed a need for government to first monitor the impact of the exemption before any other decision is made.

David Bahati, the State Minister for Planning on Tuesday argued that a blanket exemption on all SACCOs will be abused since successful businesses will register as SACCOs to avoid taxation.

The government expects to generate 951 billion Shillings from all the proposed policy measures and another 272 billion Shillings from administrative efficiency to achieve the policy target of 0.5percent in line with the National Development Plan II.

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