The court has temporarily stopped gambling and lottery firms from deducting 20 percent tax on winnings pending the hearing of a civil case filed by a betting enthusiast.
Senior resident magistrate Dennis Kivuti Tuesday declined to lift his April 11 orders that barred SportPesa from deducting tax on winnings by petitioner Benson Irungu and other winners.
The Kenya Revenue Authority (KRA) had asked the court to stop the order, arguing it will freeze collections of about Sh2.7 billion monthly from winners, the tax which is deducted and withheld by betting and lottery firms.
The April 11 orders overturned the March 29 court directive that had allowed the KRA to demand winning tax from the betting firms.
Mr Kivuti, however, ruled that the matter be heard next Monday after Mr Irungu asked for more time to respond to the KRA’s petition.
The order, according to an internal memo by KRA acting commissioner for legal services Paul Matuku, has suspended the operation of sections 2,10, 34 and 35, which provide for deduction of withholding tax from winning on betting.
“The effect of the said order is that the KRA is unable to collect approximately Sh2.7 billion per month …(meant) to finance sports, art, culture development and universal healthcare,” Mr Matuku said in the memo referring to a directive by Treasury secretary Henry Rotich in the Budget Statement for the current year.
The law passed last year allow betting and gaming firms will withhold a fifth of the sums won by punters to be remitted to the taxman. It restored the tax charged on betting winnings that was dropped in 2016 due to numerous hiccups in its implementation.
In May 2014, Mr Irungu won some Sh2,400 after a successful bet on the SportPesa platform.
He then filed a suit at the Chief Magistrate’s court seeking to restrain Safaricom’s mobile money payments platform, M-Pesa, from deducting tax on his cash prize.
The magistrate’s court issued an order “restraining the defendant (SportPesa), its agents and/or servants from making any deductions on the plaintiff or on any person’s winnings in a bet or game of chance pending hearing and determination of the suit herein”.
The taxman in May last year sent a demand notice to Pevans East Africa, the entity behind SportPesa, asking it to remit Sh10.3 billion withholding tax from betting game-winners for the period between 2015 and 2016.