The Parliamentary Committee of Finance turned down a proposal by the Savings and Credit Cooperatives Societies (SACCOs) to be exempted from paying taxes. The SACCOs claim that taxes hinder their efforts to raise internal funds, and erode resources that could have been used for capacity building and growth.
During a Committee meeting on Tuesday 11th April, 2017 at Parliament, the legislators on the Committee told stakeholders from the Uganda Cooperative Alliance (UCA), Uganda Cooperative Savings and Credit Union (UCSCU), Uganda Central Cooperative Financial Services (UCCFS) and other leading SACCOs that Parliament could not curtail the law governing financial services in favour of SACCOs.
The Chairperson to the Committee, Hon. Henry Musasizi (Rubanda East) said that the Committee needed a solid reason to convince the government to waive taxes.
“Why shouldn’t I, as a SACCO member, pay tax on my interest earnings, yet people saving in other financial institutions pay tax? What is the problem with me paying taxes on dividends that I earn through a SACCO?” Musasizi asked.
Musasizi said that SACCOs just like other financial institutions operate in the same environment. “SACCOs just like banks make profits on all their investments; why should they be exempted?” he asked.
Hon. James Kakooza (Kabula County) added that Parliament cannot develop a law that is discriminative and biased. “The law targets institutions that offer financial services which include SACCOs so they are expected to pay taxes,” he said.
Furthermore, Hon. Francis Mukula (Agule County) said that many of the SACCOs suffer from issues of poor management, gross abuse of funds and poor record keeping and therefore even if taxes are waived, the SACCOs will not progress.
“The major focus of these SACCOs should be to streamline their management and operations in order to be efficient and realise better returns,” Mukula said.
However, Methods Mureebe from the Parliamentary SACCO said that the tax waiver would be beneficial to SACCOs whose motive is to build communities, unlike banks whose motive is to make profits.
“These SACCOs are owned by the communities they serve and they offer financial services at much friendlier rates to the people in villages who cannot access the expensive financial services of corporate banks,” Mureebe said.
Stephen Bongonzya from the Uganda Cooperative Alliance also argued that the interest earned by members in most of the SACCOs is too small to be taxed.
“Our members are mainly located in the rural areas which makes it difficult for them to understand why they have to pay taxes yet they are poor. Most people would rather keep their savings in a rudimentary way without them being taxed,” Bongonzya added.
The Committee resolved that the SACCOs develop better ways of operation, and stronger reasons for them to be exempted from paying taxes.