Henry Rotich's gamble a big miss, says Jakoyo Midiwo

The architect of the Bill to regulate the gambling sector has praised the proposed tax increase on betting firms but feels Treasury Cabinet Secretary Henry Rotich missed the point.

Gem MP Jakoyo Midiwo says the government should come up with a way to stop the proliferation of slot machines, which have gone all the way to villages and are uncontrolled.

SLOT MACHINES

“I was trying to increase taxes but regulate the industry. There are too many people doing betting illegally. The Chinese slot machines are the problem. How I wish the government would outlaw them,” he said.

While every gambler knows the prominent and well-regulated betting companies, Mr Midiwo said, the unregulated slot machines would need a comprehensive law.

Part of the problem in dealing with the machines has been the fact that betting is regulated by the county governments that have obtained court orders barring interference from the national government’s administration.

The MP said increasing the tax on revenue to a flat 50 per cent across all types of gambling firms would however result in more lobbying of MPs to shoot down that part in the Finance Bill.

'PUNITIVE'

“If you go too high, who will you raise the tax from if you don’t raise it from them?” he said soon after Mr Rotich's Budget Statement on Thursday.

Other leaders in the National Assembly, however, praised the move, with Majority Leader Aden Duale and ODM Chairman John Mbadi describing the increase as a punitive but necessary measure to stem the perceived ills of the habit.

“They have fought many Bills here but now the shocker has fallen on them," said Mr Duale.

"That will save our youth. This is a punitive measure and deterrent to the social ills in the same way taxes are always increased on cigarettes and spirits,”

Mr Mbadi said the sector needed tough regulation.

TAXES

“That one I support fully because this sector is acting like a pyramid scheme,” he said.

He, however, criticised the decision to remove taxes on maize imports for the next four months.

“That is ill-informed. The problem is not that we don’t have enough maize. It is a question of distribution. The measures are more likely to benefit the middlemen and affect local farmers negatively,” said Mr Mbadi.

“The Cabinet Secretary wanted to cushion the less privileged but he didn’t know how to do it."

Mr Mbadi said the move was likely to morph into the scandal that rocked the coalition government when it sought to have maize flour at low prices for the poor.

FIRMS PAY

Last year, the National Assembly approved changes to the law on betting so that companies pay tax on their revenue and then pay tax on their profits.

Gamblers themselves, whether in casinos or on sports betting, don’t pay tax on their winnings as that proved difficult to manage.

For betting companies proper, which make money by having players place bets on the outcomes of events such as football games – the most common in Kenya – and other sporting events, the tax man collects 7.5 per cent of the money they remain with after paying out winnings to customers.

For lotteries, the rate is five per cent of the turnover, which is the amount they are left with after paying out the winnings.

Gaming companies hand over 12 per cent of the revenue after paying out the winnings while those that run competitions where players are charged to enter pay prize competition tax set at 15 per cent of their total gross turnover.

Kenya Revenue Authority officials told the Labour and Social Welfare Committee in February this year that the new taxes would take effect on February 20.

STIPEND

Central Bank Governor Patrick Njoroge described the proposal to have all people above 70 years receive a monthly stipend from the government as well as have their National Hospital Insurance Fund paid for as "bold".

“That’s quite bold. You don’t put in place a policy like that without thinking about how you will sustain it,” said Dr Njoroge.

He said the reduction of the taxes on maize and bread would have a huge impact on large numbers of people.

On the target to have Sh1.7 trillion collected as taxes, Dr Njoroge said the target will have to be increased because expenditures are also huge, and the Budget has a deficit.

“The efficiency of taxation is the issue. He (the CS) is aware of the risks, both the external and the domestic such as the elections and the drought, so I would term this as a cautious Budget,” said Dr Njoroge.