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Economy

Reprieve for betting firms after MPs back gambling tax review

A customer on a slot machine at a casino in
A customer on a slot machine at a casino in Eastleigh, Nairobi. FILE PHOTO | NMG   

The Parliament has cut the proposed tax on lottery and betting winnings to 10 per cent and supported the Treasury’s bid to lower gaming levies by more than half to 15 per cent.

Finance and National Planning Committee has proposed to reduce tax on winnings from 20 per cent the Treasury had proposed to 10 per cent.

The Tax Laws (Amendment) Bill 2018 sought to restore the 20 per cent tax charged on betting winnings that was dropped in 2016 due to numerous hiccups in its implementation.

“To be able to increase the tax base to also include winnings who form approximately 88 per cent of all the revenue generated from these activities and because this is the first time taxation is being introduced, the committee was of the view that 20 per cent is too high and hence the adoption of 10 per cent for both residents and non-residents,” said Joseph Limo-chaired committee, in its report on the consideration of the Tax Laws (Amendment) Bill, 2018.

The committee backed the Treasury’s proposal to cut gaming tax from 35 per cent of revenue to 15 per cent.

The move will be a boon to betting firms that opposed the new tax, which took effect on January 1, if the Parliament approves the Finance and National Planning Committee’s recommendations.

The companies argued that the high taxes would hurt their business and create a black market for betting.

Besides the 35 per cent tax on revenues, betting companies pay 30 per cent corporate tax and dedicate 25 per cent of their sales to social causes such as 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, a further relief to gaming firms.

However, as the Treasury eases the burden for operators, it seeks to transfer part of it to individual gamblers who are set to pay the 10 per cent of their earnings to the taxman.

If passed, betting and gaming companies would withhold a tenth of the sums the punters win and remit the cash to the taxman. The committee, which has the powers to review tax amendments, overruled Labour and Social Welfare Committee, which had opposed the cut in betting tax.

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