Tax proposal on betting blow to sports

Andrew Mutiso is an up-and-coming footballer.

Aged 19, he has already completed his high school education and is looking forward to a bright future.

However, Andrew is not your average young adult. He is a skilled footballer.

He once represented his school in the Kenya Secondary Schools Sports Association football championships where his team lost in the final.

PREMIER LEAGUE

During the tournament, he caught the eye of soccer scouts.

By the time, it was announced that he had scooped the most valuable player award, he had two contract offers.

He later signed for a top club. His goal was to showcase his skill and hope to attract top European clubs.

After all, Victor Wanyama, now at English Premier League giants Tottenham Hotspur, did so.

The contract guaranteed Andrew a monthly salary of Sh60,000 and a signing fee of Sh150,000.

At 19, he was already gainfully employed. Thanks to football, he could afford to pay rent for a one-bedroom apartment in Zimmerman, Nairobi, and assist his parents to pay school fees for his younger brother in Form Two.

SPONSORSHIP

However, a few weeks ago his dream started caving in.

A leading television broadcaster closed its Kenyan operations, denying footballers television coverage, a medium that has catapulted many to the international stage.

A week later, his club announced that its shirt sponsor, a sports gaming firm, was faced with the prospect of terminating the deal because of taxation.

The thought of a bleak future is unnerving to Andrew, fellow players, sports administrators and soccer fans.

But what is causing jitters within the sporting fraternity?

In the Budget Speech delivered on March 30, National Treasury Cabinet Secretary Henry Rotich sought to introduce a uniform 50 per cent tax across the board on betting, lottery, gaming, and competition from the current rate of 7.5 per cent, five per cent, 12 per cent and 15 per cent, respectively.

TAXES

The proposal means that the industry will be taxed for half of its gross earnings before expenses and subjected to a further 30 per cent on profit after deducting other expenses.

The industry is also subject to statutory taxes such as withholding tax and PAYE.

If adopted, it could lead to a complete shutdown, wiping out huge investments in infrastructure, marketing, sports sponsorships, taxes to the Exchequer and other multiplier effects.

In response, Football Kenya Federation president Nick Mwenda said: “The proposal might wipe out vital investments undertaken by betting companies.”

RETROGRESSIVE IDEA
The plan poses a danger to the growth of sports benefiting from betting, gaming and lottery enterprises.

It will roll back gains made in the past two years.

To compound the problem, the Cabinet minister proposed that the tax revenue be put in a newly created National Sports, Culture and Arts fund to support the development of sports, culture and arts.

This is only targeted at the tax-compliant betting companies that support sports.

Apart from FKF that called for dialogue, other sports bodies have opposed the proposal, citing the lack of capacity to manage the fund.

SPORTS MINISTRY
The Kenya Rugby Union said: “There is hardly anything to look forward to with the establishment of this fund, especially when little if no regard has been given to the detailed funding requirements of each sports federation.”

A new bureaucratic institution is not the solution to the challenges in sports.

On paper, the fund is a noble gesture but its implementation is not viable.

In the fiscal years 2015/2016 and 2016/2017, the Ministry of Sports received an allocation of Sh8 billion.

It is not clear how the money was utilised.

EMPLOYMENT
Through sponsorship, the betting industry has boosted the professional management of sports.

In less than two years, the industry has put in more than Sh3 billion.

This has helped sports bodies to start development programmes.

Sports business can create many more jobs through branding rights, improvement of infrastructure and 'professionalisation'.

The writer is a sports marketing enthusiast. [email protected]