Levies paid by punters more than doubled last December, a month after the Kenya Revenue Authority (KRA) integrated its system into that of betting firms and started collecting taxes on a daily basis.
Data from the National Treasury shows that withholding tax on winnings from betting jumped by 116.9 percent to Sh1.008 billion last December from Sh465 million in the same month in 2021.
This reflects an early success of the decision by the taxman to plug into the platforms of betting and gaming companies to allow real-time computation of taxes.
The first batch of the top six payers started daily remittances of excise and withholding tax on winnings in mid-November 2022 after a successful pilot.
The data also shows a growth of 7.2 percent in withholding taxes on winnings to Sh3.4 billion in the first six months of the current financial year ending June compared to Sh3.17 billion between July and December 2022.
Other tax heads also performed well, an indicator that betting and gaming will be a rich hunting ground for the taxman who has been given a high target of Sh3 trillion in the upcoming financial year starting July.
“Capital gains, stamp duty, the excise tax on betting services, and withholding tax on winnings from betting and gaming recorded above target performance,” read the document.
Surplus accruing from the capital gains tax amounted to Sh3.17 billion while that of stamp duty was Sh939 million.
Excise tax on betting services was Sh233 million and Sh189 million for withholding tax on winnings from betting and gaming.
“Surplus funds also realised a collection of Sh940 million in the month (December 2022).”
Collections from these tax heads in the month of December 2022 account for five percent of domestic tax revenue.
If this holds for the first six months, it means that betting alone contributed Sh35.5billion to the country’s coffers, as the government earned a total of Sh709.3 billion from domestic tax revenues, including corporate income tax, pay as you earn, domestic value-added tax and excise duty.
This comes at a time when the KRA missed its target for the first six months of the financial year 2022/23 by Sh43.2 billion, pointing to tough economic times that have affected business output.
Between July and December last year, KRA collected Sh985 billion against a target of Sh1.03 trillion, data from the Treasury shows.
The taxman said it had hooked the second batch of the top 10 betting companies on its system, bringing the total number of companies it has real-time access to, to 16 as it scales up the fight against tax cheats in the sector.
Real-time payments and data transmission for the rest have also commenced with those hooked on the taxman’s system required to compute and pay taxes due every day.
This is a departure from the past when most taxes were paid in the next month after they fell due.
The taxman says this would allow it to have visibility of real-time betting transactions after it starts receiving all information on betting, including the amount of money staked and won by punters as it moves to collect more revenues.
The KRA says the visibility of real-time betting transactions and unavailability of betting and gaming transactions data was the key challenge it faced in the fight against tax cheats in the betting industry.
“With integration, the daily visibility is providing daily trends upon which compliance measures can be taken,” said Rispah Simiyu, Kenya Revenue Authority’s commissioner of domestic taxes.
So far, the betting companies that we spoke to welcomed the move, with a rider that the taxes were too high.
This is part of the KRA’s integration of its system with that of the betting sector, with the first phase, which began in mid-November, being the daily collection of the 7.5 percent excise duty on stakes and the 20 percent withholding tax on winnings from these companies.