Rédaction Africa Links 24 with The Observer
Published on 2024-04-04 07:10:01
Saccos in Uganda play a vital role in providing financial aid to people through access to loans. Therefore, it is crucial that Saccos are exempted from taxation as they offer financial services that are an alternative to traditional banking institutions. The International Monetary Fund (IMF) recently recommended the removal of tax exemptions on incomes from Savings and Credit Cooperation Societies (Saccos) in Uganda as a way to boost corporate income tax collection. However, this recommendation has been met with criticism and opposition.
The IMF, along with the World Bank, is responsible for monitoring economic and financial policies of member countries and providing policy advice for economic recovery. Following the devastating effects of Covid-19, the IMF issued recommendations to help countries affected by the pandemic recover economically. One of the recommendations was to remove tax exemptions on Saccos in Uganda.
It is important to note that Saccos play a significant role in providing financial aid to people, especially those in rural areas. Many individuals rely on Saccos for access to loans and funding for entrepreneurial ventures, such as farming. By exempting Saccos from taxation, the government can help promote economic growth and reduce poverty among its citizens.
The argument for removing tax exemptions on Saccos is based on the need to streamline the country’s tax exemption regime and increase revenue collection. However, Saccos already contribute to national coffers through indirect taxes and operational licenses. Therefore, the argument that removing exemptions would boost corporate tax collections is flawed.
Saccos also play a crucial role in encouraging savings among individuals. With over 1,300 registered Saccos in Uganda and billions of shillings in savings, Saccos have become a popular choice for many Ugandans who do not have access to formal banking services. Removing tax exemptions on Sacco savings would discourage people from saving and participating in the country’s economic environment.
Furthermore, Saccos provide an alternative banking system to many Ugandans, especially farmers. Formal banks already enjoy a number of tax exemptions, making it only fair that Saccos also benefit from similar exemptions. Exempting banks and not Saccos would discourage the growth of Saccos and push people towards using traditional banking institutions.
It is important to note that the tax exemption for Saccos was capped at 10 years and is set to expire in 2027. This timeframe was put in place to allow Saccos to grow, mobilize members, and contribute to economic growth. It is crucial that the remaining period of the exemption is allowed to run its course to support the growth of Saccos in Uganda.
In conclusion, taxation of Saccos in Uganda would discourage their growth and hinder their ability to provide financial aid to individuals in need. The government should consider the unique role that Saccos play in the economy and continue to exempt them from taxation to promote economic growth and reduce poverty.
Read Original article on The Observer
