Economy

Betting tax cut by more than half to 15 per cent

bet

A betting shop in Nairobi. FILE PHOTO | NMG

The Treasury has caved in to pressure from betting firms and proposed to cut gaming tax from 35 per cent of revenue to 15 per cent.

The proposed lower rate is contained in a Bill tabled in Parliament Thursday by National Assembly Majority Leader Aden Duale.

“The Bill seeks to amend the Act (Betting, Lotteries and Gaming Act) to reduce the amount of betting and lottery tax payable by operators,” reads the Bill.

The tax cut proposal, if approved by Parliament, will be a boon to betting firms that opposed the new tax which took effect on January 1.

The firms reckon that the high taxes will hurt their business and create a black market for betting.

Besides the 35 per cent tax on revenues, betting firms pay 30 per cent corporate tax and dedicate 25 per cent of their sales to social causes like sports sponsorship as a legal requirement.

The new Bill has also cut the share of sales meant for social causes and charity from 25 per cent of sales to at least five per cent, further relief to gaming firms.

READ: Treasury hits gamblers with 20pc winning tax

Individual gamblers

But as the Treasury eases the burden for operators it seeks to transfer part of it to individual gamblers who are set to pay 20 per cent of their earnings to the taxman.

Tax experts said that should the Bill sail through, the taxman will demand that betting companies deduct and remit the 20 per cent withholding tax on every gaming win.

Fred Omondi, a tax consultant at Deloitte, said there should be clarity on how the windfall tax will be charged in cases where gamers win property like cars.

The lower gaming tax is a reprieve to members of the Association of Gaming Operators Kenya (Agok) who for the past 10 months have petitioned the government to lower the levies.

Before January 1, lotteries were taxed at five per cent of their sales, betting firms at 7.5 per cent, casino gambling 12 per cent and competitions like raffles 15 per cent besides other taxes and levies.

Pambazuka National Lottery was the first casualty of the higher tax regime. It closed in January, hardly 18 months after it was launched.

Stop sponsorships

Kenya’s biggest betting firm SportPesa stopped Sh600 million local sports sponsorship following the imposition of higher gaming taxes in a move that hurt football clubs, rugby union and the soccer federation

READ: SportPesa most popular online betting platform

Consultancy firm PricewaterhouseCoopers (PwC) in January revealed that Kenya’s betting tax is the highest in the region, ahead of gaming hubs like the famed Las Vegas.

PwC says the 35 per cent tax on all gambling revenues is high compared to other African countries like South Africa, which charges 9.6 per cent, Rwanda (13 per cent) and Uganda (20 per cent).

Treasury secretary Henry Rotich said the government increased the taxes to curb exponential growth of gambling that was hurting the young and vulnerable.