EDITORIAL: Taxing betting heavily a gamble that misses point

What you need to know:

The government has insisted that the sector needs to be taxed heavily to protect the youth who form the majority of the punters.

The National Treasury’s announcement that it plans to impose a 20 per cent tax on gamblers’ winnings makes the clearest signal that the government wants to discourage gaming by squeezing as much revenue as it can from the industry.

If the plan is to stifle the industry, we can only hope that the attainment of this goal far outweighs its attendant consequences, which include loss of jobs and lower tax income going forward.

The government has insisted that the sector needs to be taxed heavily to protect the youth who form the majority of the punters.

But short of banning gambling, tax measures that largely reduce margins for the operators and the few lucky winners is an indirect and ineffective means of curbing the practice.

It is still early days but the policymakers’ attitude appears to be that the industry can still take in more taxation and muddle through. That assumption will be tested in the coming months when the rubber meets the road.

Already, Pambazuka National Lottery has suspended its operations and its affiliate betting firm SportPesa cancelled its Sh600 million annual funding to sports organisations.

READ: Treasury hits gamblers with 20pc winning tax

The government announced it would step in to fill gaps left by the exit of sports sponsors but details of its commitment are yet to emerge.

Casinos have also warned of the possible contractionary effect of the tax increments on gaming, lotteries, betting and prize competitions.

This happened after the tax on betting, lotteries and prize competitions was increased to a uniform 35 per cent of turnover from the previous 7.5, five, and 15 per cent respectively.

The plan to take a fifth of winnings looks particularly rash. As one observer noted, how will the taxman collect its dues in situations where the prize is a property like a car or a house? Legislation should address this.

Gaming firms appear to be the soft targets at a time the government has failed to impose taxes on other types of unearned income including capital gains on listed equities.