SportPesa to shut down Kenyan unit after tax increase
What you need to know:
- Company says it may be forced to shift to the United Kingdom and Tanzania
- It says the enhanced tax is not founded on any basis other than killing industry
- Before, licensed sports betting operators had been subject to a 7.5 per cent betting tax.
Gaming firm SportPesa will close its Kenyan operations and move to other jurisdictions should the law prescribing a 35 per cent turnover tax for the industry remain in force.
The firm is considering shifting base to Tanzania or the United Kingdom (UK) in a move that could lead to loss of tens of jobs.
SportsPesa Global chief executive officer (CEO) Gerasim Nikolov said the company can no longer operate profitably under the current taxation regime.
“There is nowhere in the world where such a huge tax is levied on turnovers and even here in Kenya, no firm can survive today if a 35 per cent tax was put on its turnover.
"Unfortunately, the ultimate effect of us shifting operations from here will be wide considering the various business that depend on this industry,” said Mr Nikolov at a media briefing Friday.
Finance Bill
President Uhuru Kenyatta signed the Finance Bill 2017 into law imposing a uniform 35 per cent tax on all gambling revenue – betting, gaming, lotteries and prize competitions.
Before, licensed sports betting operators had been subject to a 7.5 per cent betting tax.
The government had targeted to reap higher tax revenue from the fast-growing industry and at the same time deter minors from getting addicted to gambling.
SportPesa Kenya CEO Ronald Karauri, however, said the tax cannot discourage betting as it has no direct impact on participants’ earnings as is the case with other sin taxes like excise levy.
“You cannot run a business just to pay tax to the government. It is not worth the sweat and were we not present in the UK and Tanzania, we would just wind up. I don’t think the government will benefit either because this is a death sentence to the whole industry,” said Mr Karauri, who also chairs the Association of gaming Operators (AGOK).
Sponsorship withdrawal
Last month, the SportPesa founder announced the withdrawal of sponsorship to local sports clubs from January citing the new tax burden.
The firm, founded in Kenya in 2014, currently sponsors Gor Mahia and AFC Leopards, Kenya’s biggest football teams.
It also sponsors the Kenyan Premier League (KPL) and the Kenya Football Federation.
The firm recently opened Tanzania operations and announced a Sh2.2 million sponsorship for the Serengeti Boys football team after it made entry in May.
Parliament initially slapped a 50 per cent tax on sports betting sites and lottery companies, but later lowered it to 35 per cent before Mr Kenyatta signed it into law.
'Shooting us'
“Instead of hanging us, they have decided to shoot us. This tax is not founded on any basis other than killing the industry.
"We can only hope that a new consideration can be given before it is left to stifle the industry completely,” said Mr Nikolov.
The Kenya Revenue Authority (KRA), which collected Sh4.7 billion in revenues from gaming firms, had proposed that the tax be doubled to 15 per cent to be at par with what Rwanda (13 per cent ) and Ghana (17.5 per cent) levies.
According to KRA, the 35 per cent tax would yield more revenue to the government, but will in the long run drive away investors and trigger transfer pricing by players.
