Saccos are the latest to push back against plans to allow the Kenya Revenue Authority (KRA) to raid taxpayers’ bank accounts in the middle of contested tax demands, warning of potential cash flow pressures and operational disruption.
The Kenya Union of Savings and Credit Cooperatives (Kuscco) on Wednesday asked the National Assembly not to pass the proposal in the Finance Bill 2026, which seeks an amendment on the Tax Procedures Act.
Section 42(14) (e) of the Tax Procedures Act bars the KRA from issuing agency notices, freezing bank accounts and assets or taking any enforcement measures while a tax dispute is still active or under appeal.
However, the Finance Bill 2026 is proposing the deletion of this provision.
“Taxpayers may feel compelled to prioritise immediate financial survival over the pursuit of legitimate claims, particularly where enforcement measures such as agency notices restrict access to working capital or disrupt operations,” Kuscco said in submissions made to Parliament by its Chief Executive Arnold Munene.
Kuscco joins the Kenya Bankers Association and Kenya Private Sector Alliance (Kepsa) in campaigning against the proposal.
According to Kepsa, the agency notices will compel third parties—typically bank or trade debtors—to remit funds directly to the KRA on behalf of the taxpayer even before a dispute is heard and determined.
“If the taxpayer subsequently succeeds on appeal, recovery of those funds from KRA is uncertain or protracted,” Kepsa said in its submissions on May 25.
“The practical effect is that the right of appeal is rendered illusory. A taxpayer who cannot withstand the financial pressure of an agency notice is compelled to abandon a meritorious appeal or settle under duress rather than on the merits.”
Kuscco told the National Assembly Departmental Committee on Finance and National Planning that allowing the taxman to recover disputed amounts through agency notices will disrupt operations of financial entities such as saccos by restricting access to working capital and liquidity.
“Funds held in sacco accounts are not idle reserves but are deployed to support lending, member withdrawals and ongoing financial obligations. The issuing of agency notices against such funds can disrupt lending and delay access to member savings,” Mr Munene said.
Similar attempts to expand the enforcement powers of the KRA have been proposed in previous Finance Bills, reflecting an ongoing policy tension between strengthening revenue collection and protecting the Kenyan taxpayer.
Kepsa said giving KRA such powers will have “immediate and severe” consequences for taxpayers with disputes currently before the courts, given that they had structured their litigation strategy on the basis of the existing tax procedures.
“Removing that protection mid -litigation—without any transitional provisions—exposes them to enforcement action they had no reason to anticipate when commencing their appeals. We submit that the proposed deletion should be rejected in its entirety,” Kepsa told the parliamentary team.
Private sector players are concerned that premature enforcement through agency notices also poses difficulty and delay in obtaining refunds where a taxpayer ultimately succeeds in a dispute.
Kenya’s tax dispute resolution process – from objection to tribunal and court determination – is usually lengthy.
Private sector players are, therefore, worried that the decision would see them part with significant amounts and chase the money for many years since refunds are “neither automatic nor immediate” when they win cases.
“The issuance of agency notices during disputes may significantly disrupt business operations by restricting access to working capital and liquidity,” Mr Munene added in his submissions.
“This risk is particularly pronounced for saccos and other financial institutions, whose operational stability depends on the continuous availability of funds.”
