Henry Rotich yesterday came down hard on the gaming and betting industry introducing one of the most punitive tax measures. GRAPHIC: GENNEVIEVE AWINO | PHOTO: SALATON NJAU
The minister pulled out of the bag a grossly significant but expected tax measure that will see a general rise in the cost of consumer goods.
Excise taxes are expected to jump from Sh180.8 billion in the current budget to Sh199.8 billion in the next fiscal year, according to budget estimates recently tabled in Parliament.
Excise tax on spirits was singled out for a special increment to Sh200 per litre from the current Sh175 per litre.
Levies on betting, lotteries, gaming and firms running competition prizes will rise from the current 7.5, five, 12 and 15 per cent respectively to a flat of 50 per cent.
Eight major players in the betting sector paid a total of Sh4.7 billion in taxes over the past three years, KRA officials told Parliament recently.
Treasury secretary Henry Rotich yesterday came down hard on the gaming and betting industry introducing one of the most punitive tax measures as he moved to open new revenue sources to finance his Sh2.62 trillion budget and respond to rising concern over its social impact, especially among the youth.
The minister also pulled out of the bag a grossly significant but expected tax measure that will see a general rise in the cost of consumer goods, with the announcement that excise tax will be adjusted for inflation beginning July.
The tax, which is chargeable on commodities such as beer, fruit juice, cigarettes, and cosmetics, will rise in line with the average rate of inflation for the 12 months ending June 30, 2017.
The cost of living rose by an average of 6.4 per cent in the first half of the fiscal year, signalling a steep rise in the cost of goods once the Kenya Revenue Authority (KRA) publishes the applicable rate.
“The inflation adjustment that will be effected from July 1 this year will increase government revenue in line with inflation. KRA will publish the new inflation-adjusted tax rate for all excisable goods shortly,” Mr Rotich said.
The adjustment alone is expected to raise tax revenues by tens of billions of shillings, allowing Mr Rotich to make a raft of small cuts on other levies, including Pay-As-You-Earn (PAYE) for low-income workers.
Excise taxes are expected to jump from Sh180.8 billion in the current budget to Sh199.8 billion in the next fiscal year, according to budget estimates recently tabled in Parliament.
Beer is currently taxed at Sh100 per litre, cigarette at Sh2,500 per mille, fruit juices at Sh10 per litre and illuminating kerosene at Sh7,205 per 1,000 litres.
Mr Rotich announced a special tax rate of Sh1,800 per mille for plain cigarette, decoupling them from those with filters that will continue to be taxed at the rate of Sh2,500 per mille.
“This tax measure will ensure equity and fairness in the tobacco industry and prevent job losses in this sector,” Mr Rotich said.
Prices of these commodities, among other items, are expected to rise significantly once the excise tax is adjusted upwards. The introduction of the inflation adjustment means their prices will rise automatically each year, piling pressure on household budgets.
Excise tax on spirits was singled out for a special increment to Sh200 per litre from the current Sh175 per litre, with Mr Rotich saying the taxman will be seeking to collect more from this liquor class whose consumption has grown rapidly.
Members of the public wait outside the Treasury building as CS Henry Rotich prepared to head to Parliament yesterday. PHOTO | SALATON NJAU | NMG
Betting and gaming
Levies on betting, lotteries, gaming and firms running competition prizes will rise from the current 7.5, five, 12 and 15 per cent respectively to a flat of 50 per cent, making it one of the highest corporate taxes.
Mr Rotich said activities promoted by these firms have become a social vice, necessitating the steep tax. Higher collections from the industry will be used to fund the newly created National Sports, Culture and Arts Fund.
Eight major players in the betting sector paid a total of Sh4.7 billion in taxes over the past three years, KRA officials told Parliament recently.
The Treasury’s move comes in the wake of sustained efforts by Gem MP Jakoyo Midiwo to introduce a Bill that seeks to control the activities of betting, gambling and lottery firms. Mr Midiwo drafted the Betting, Lotteries and Gaming (Amendment) Bill, 2016 after he failed to secure MPs’ backing to form a select committee to inquire into the activities of betting and gambling firms, with special emphasis on tax compliance, disclosure of information and management of proceeds.
The proposed law bars sports betting firms from splashing advertisements in print and electronic media ahead of key local and international football matches. “The issue is not about taxation of sports betting firms but regulation of the whole betting industry. It is not in the interest of government to push private firms out of businesses,” Mr Midiwo said in reaction to the Treasury tax.
“I think the 50 per cent tax is an ambitious way to strike a balance between my Bill and taxes to be charged on the firms.”
Mr Midiwo said the Treasury would only net tax from 10 per cent of betting firms while leaving out 90 per cent of unregulated amusement machines in city estates run by the Chinese.
The tax measures are expected to help raise ordinary revenue collections to Sh1.549 trillion from the current Sh1.515 trillion.
Mr Rotich anticipates a fiscal deficit of Sh524.6 billion, which will be plugged through external borrowing (Sh256 billion) and domestic borrowing (Sh268.6 billion).
