Parliament has rejected the Treasury’s proposal to cut gaming tax from 35 per cent to 15 per cent of revenue.
The National Assembly committee on Labour and Social Welfare has withdrawn the proposed amendments contained in a bill that seeks to amend the Betting, Lotteries and Gaming Act.
The committee said the proposals seek to subvert broad consultations, the legislative authority of the National Assembly and court rulings that dismissed a suit against the 35 per cent tax.
“In light of the foregoing, the proposed amendment to sections 29A, 44A, 55A and 55B should be withdrawn,” the committee chairman, Victor Munyaka, said in a statement.
The Treasury had caved in to pressure from betting firms and proposed to cut the tax.
The firms reckon that the high taxes—which took effect on January 1-- will hurt their business and create a black market for betting.
Besides the 35 per cent tax on revenues, they 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 had also cut the share of sales meant for social causes and charity from 25 per cent of sales to at least five per cent, giving further relief to gaming firms.
But as the Treasury sought to ease the burden for operators it pushed to transfer the pain to individual gamblers, who are expected to start paying 20 per cent of their loot to the taxman.
The proposed lower tax rates are contained in a bill tabled in Parliament last month by National Assembly Majority Leader Aden Duale.
In recommending the withdrawal of the proposed amendments, Mr Munyaka said the sections have been a basis of court cases filed by betting firms in Kenya on grounds that the taxes are too high and hence offends Article 201 of the Constitution, which provides that the burden of taxation shall be shared fairly.
He said in December 2017, the High Court, through Justice John Mativo, dismissed the suit arguing that “the tax complained of falls under the category described as sin tax and is aimed at discouraging activities in question.”
“It has not been demonstrated that the tax is punitive. No evidence of abuse of tax policy was demonstrated in this case,” Justice Mativo ruled.
Before January 1, lotteries were taxed at five per cent of their sales, betting firms - bookmakers - at 7.5 per cent, casino gambling at 12 per cent and competitions like raffles at 15 per cent besides other taxes and levies.
Pambazuka National Lottery was the first casualty of the higher tax regime after closing down in January, hardly 18 months after it launched in the country.