The gaming and betting industry faces possible total collapse and with it tens of thousands of jobs once the taxation law is effected in January 2018.
The Association of Gaming Operators Kenya (Agok) Friday said their business cannot sustain the recently revised 35 per cent tax on gross profit and thereafter 30 per cent corporate tax.
The association represents the interests of casinos, lotteries and sports betting companies regulated by the Betting Control and Licensing Board.
“Increase in taxation will have a bigger negative impact. There is no business which can operate with these taxes,” said Agok chairman Ronald Karauri during a Press briefing in Nairobi.
Agok said about 10,000 people will be directly affected and forecast that the move will drive the growth of underground gambling.
“The effect will lead to the mushrooming of illegal gaming, exposing the youth to more uncontrolled betting activities,” added Mr Karauri.
Also facing the short end of the stick are various sports federations and clubs that will now have to start looking for other sponsors.
Mr Karauri said it will be impossible to continue funding the sports sector under the current taxation regime.
“We are giving a notice today to all sports federations and clubs that starting January, 2018, there will be no other funds available to them. We shall take away full sponsorship because we are not even sure that the whole business will survive,” said Mr Karauri.
“We have given this notification today so that federations and clubs can start preparing themselves just in case we don’ find a solution between now and January,” he added.
Among those that will have to go back on the drawing board for instance is the Football Kenya Federation, Kenya Rugby Union, Kenyan Premier League and Kenya Boxing Association, on whom SportPesa says it has spent an estimated Sh1 billion through various partnerships.
The industry, Agok said, contributed about Sh4.6 billion in tax in 2016.
On Wednesday, President Uhuru Kenyatta signed into law the Finance Bill (2017), effectively exposing the gaming and betting industry to higher taxation from next year.
The Finance Act seeks to amend the laws relating to various taxes and duties. It also seeks to amend in particular the Betting, Lotteries and Gambling Act (Cap.131) to increase the tax rates from current rates to 35 per cent.
Presently, there is betting tax chargeable at the rate of 7.5 per cent of the gaming revenue, lottery tax chargeable at five per cent of the lottery turnover, and gaming tax chargeable at 12 per cent of the gaming revenue.
Also companies pay the prize competition tax chargeable on the cost of entry to a competition, which is premium rated at the rate of 15 per cent of the total gross turnover.
The association had, before the signing of the Bill into law, pleaded with lawmakers to review the tax further downwards from the initially proposed 50 per cent to save the industry.
They argued that the solution to the associated social ills, that were a big push factor towards the adoption of the prohibitive tax, was on regulations and proper consultations, not taxation.