Betting firms deserve tax cuts for work they do

Just three years ago, many popular Kenyan sports teams, leagues and federations were essentially on their death bed.

At some of the most storied football clubs such as Gor Mahia, the only one in the region to have won an African championship, the picture was a landscape of desperation.

There was no sponsor in sight, salaries for players and technical staff were going unpaid. The situation was the same at most of the other clubs in the Kenyan Premier League.

Today, the picture could not be more different. The entry of the main betting company SportPesa into the scene has transformed the league, pumping in much needed resources and breathing new life into what remains by far the most popular sport in Kenya with a following of millions of young people.

With the entry of SportPesa, the players now enjoy a regular salary and this is the same for their technical teams.

Recently, the company signed a four-and-a-half-year deal with the Kenyan Premier League, which is now referred to as the SportPesa Premier League, that will see the football industry improve professional standards and performance of the clubs with the ultimate aim of securing qualification to the World Cup in Qatar in 2022.

The same thing is happening in rugby, where a partnership with the Kenya Rugby Union will see the development of national squads. 

The football national team, Harambee Stars, is likewise benefiting through sponsorship of the Football Kenya Federation, the Super 8 grassroots league has received backing as have the Boxing Association of Kenya and the Koth Biro football tournament.

The debate over taxation policy for the betting industry should be understood in this context.

The sole focus of imposing punitive taxation ignores established practice that informs the formulation of tax policy around the world.

This follows the logic that those companies or individuals that make a substantial donation to charitable causes or organisations are entitled to substantial tax relief on their total taxable income.

This is informed by the fact that government cannot do everything or take care of every sector in society. Companies and individuals are, therefore, incentivised through favourable tax policies to make a contribution to the wellbeing of society.

This best practice approach holds in jurisdictions such as South Africa where the tax code indicates that donations made to “public benefit organisations”, which include organisations concerned with welfare and humanitarian causes, are tax exempt.

In the UK, companies can deduct the donations they make to charity from the total business profits accrued before tax. Most notably, the tax code makes clear that these charitable causes include community amateur sports clubs (CASCs), which do not have an independent and reliable source of revenue.

LARGE PHILANTHROPIC SECTOR

The same applies in the US, which has a large philanthropic sector. Against this background, the question must arise: What motive is driving the MPs in their crusade of taxation against betting companies? Do they want to push out major private investors who are making a huge investment in crucial and much neglected sectors of society?

It is a fact that MPs should want to consider sports betting firms have essentially taken over the role of supporting sports teams within Kenya.

Excessive taxation will lead to the firms readjusting their budgets, meaning sponsorships will reduce.

The MPs’ stance is, therefore, baffling. It should be noted the MPs started from a platform of certitude that the betting industry in Kenya does not pay tax. However, it soon emerged that the position of MPs on this subject was simply wrong.

Betting companies have been paying 30 per cent corporation tax like every other company. Some have even received notes of commendation from the Kenya Revenue Authority for the levels of tax they have been paying.

In fact, the biggest player, SportPesa, indicated that it was on track to pay Sh1.5 billion in taxes, putting it among the top tier of companies remitting tax to the revenue collector.

What, therefore, should inform progressive tax policy in the betting domain? Certainly, careful consideration of the positive effects that the substantial investment in Corporate Social Responsibility this sector is putting into sports should enjoy primacy to avoid a situation where firms are discouraged from investing in sports and the youth. 

The writer is a commentator with an interest in sports [email protected]