Saccos will now have to dig deeper into their pockets to pay more levies annually from member contributions.
They will also be required to pay attractive dividends after the High Court declined to strike out an amendment to societies’ law.
Justice Weldon Korir, in a 60-page judgement, found that the amendments to the Saccos Societies Deposit Levy order were done in consultation with all stakeholders, hence could not be quashed or faulted.
Saccos umbrella body – Kenya Union of Savings and Credit Co-operatives (Kuscco) - has vowed to appeal the case.
Kuscco had complained that the increased levy amounted to double taxation as deposits made by members are from salaries and incomes, which are already taxed by the State.
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The judge, however, found that Kuscco had participated in consultative forums called by the regulator, Sacco Societies Regulatory Authority (Sasra), and faulted Kussco boss for filing a case without consulting members.
“The respondent (Sasra) took extensive measures to ensure stakeholders were involved in the process. It is, therefore, my conclusion that the respondent did not violate the right to fair administrative action,” Justice Korir ruled.
“The petition is bereft of merit and should be dismissed at this stage.”
The regulator amended the law, increasing an annual levy which Saccos ought to pay by 0.25 per cent. The amended law required that Saccos pay at least 0.15 per cent of the total members’ deposits to Sasra.
This was increased to 0.175 per cent but capped at Sh10 million.
Kuscco had argued that the levy would cripple its members as the amount demanded was huge.
“Saccos also contribute to the Exchequer by way of payment of license fees and taxes to the government. They also pay further levies to various county governments and there is, therefore, no justification for the increment of the levy payable,” Kuscco argued.
The judge heard that the levy would, in turn, affect how much Sacco members get each year as dividends and that the move would, in turn, affect their morale and willingness to make deposits.
Sasra, however, said it arrived at the new levy after wide consultations and faulted Kuscco for not enjoining the National Assembly in the case.