The Kenya Revenue Authority wants the directors of Gamcode Ltd, the operators of Betin betting firm, to be criminally prosecuted for their “unwillingness” to settle a Sh3 billion tax obligation.
This comes as SportPesa Saturday announced that it has halted its operations in the country while Betin declared all its staff redundant, over what they both termed a hostile taxation and regulatory environment.
“This letter serves as notice of termination by reason of redundancy,” said Betin managing director Joe Muturi in a letter addressed to staff on Friday.
He added: “This has been occasioned by the fact that we have not been operational since July 2019, a fact we are all aware of. Management has had several extensive meetings with relevant government entities regarding the company’s licence renewal without much success.”
On the other hand, SportPesa said it was disappointed by Parliament’s decision to impose 20 per cent excise tax on all betting stakes as contained in Finance Act, 2019.
“This decision will have a damaging impact on both customers and treasury,” said the firm in a press release. “Further compounded by the current in-effect 20 per cent withholding tax on winnings, the economic incentive to place bets will be completely removed as the taxes will deprive consumers of their total winnings.”
However, KRA commissioner-general Githii Mburu said it is up to the gaming regulator, the Betting and Licensing Control Board (BLCB), to decide whether to restore the licences of the affected firms.
“If they decide to wait until they finish paying the taxes to restore their licences, that’s up to them,” said Mr Mburu, adding that KRA will not issue clearance certificate to any of the gaming firms whose licences were suspended more than three months ago.
His position contradicts SportPesa’s statement nearly a month ago, which insinuated that the firm would resume operations soon after settling its tax obligations with KRA.
“There has been notable progress in these sessions and we are pleased to announce that Kenya Revenue Authority have now cleared us to have our licence renewed,” said the betting firm.
“SportPesa is confident that these processes will be completed soon, allowing the company to resume full operations,” it added. KRA is demanding from the firm Sh23 billion in withholding tax as from 2015 to April this year.
Two weeks ago, acting BCLB managing director Peter Mbugi said SportPesa will have to reapply for its operating licence afresh, which the firm had done.
Mr Mburu said he was not aware of the details of agreements struck by his officers and individual betting firms during negotiations, but said that most of the betting firms have entered into payment plans with KRA.
However, he was quick to point out that “payment plans are not actual payments”, adding that “we shall assess the commitment and ability of each of them to pay.”
Betin’s perceived “reluctance” to settle its Sh3.05 billion tax arrears has forced KRA to think of taking sterner action against the firm by instituting criminal proceedings against its directors.
The company is owned by Coast-based Italian millionaires Domenico Giovando and Leandro Giovando. The other shareholder is Mauritius-based Samson Capital.
To endear the company to Kenyans, Betin unveiled former Inter Milan football player MacDonald Mariga as its brand ambassador. Mr Mariga is contesting the Kibra parliamentary seat on a Jubilee Party ticket.
On September 13, Mr Tomkys Kigen, who is in-charge of the betting and gaming sector at KRA, wrote to Betin’s boss, Mr Muturi, notifying him of the dramatic action they intend to take.
“We refer to the various engagements between yourselves and our team regarding outstanding withholding tax on winnings arrears,” said Mr Kigen’s letter. “We regret that you have not made any notable progress and that you have not shown commitment to pay the arrears in full.”
However, in an affidavit sworn by Mr Muturi dated September 17, Betin pointed out that the Tax Appeals Tribunal issued stay orders against the issuance of further enforcement proceedings by KRA against Betin. The tax dispute between the betting firm and KRA is being heard by the Tribunal.
“I am advised further by the Applicant’s Advocates on record…that the intention to prosecute the Applicant’s directors is in bad faith since the matter(s) in contention have not been decided by the Honourable Tribunal and the said action is in contempt of orders of this Tribunal and further it seems the Respondent (KRA) has stepped into the shoes of the Tribunal and made a determination on the pending Appeal that it now seeks to enforce against the Applicant,” said Mr Muturi in his affidavit drawn by their lawyers Anjarwalla & Khanna LLP.
However, KRA’s advocate, Mr G.O. Ochieng, opposed Betin’s application, saying the existence of the civil suit does bar the taxman from pursuing criminal proceedings against the betting firm.
SportPesa has similarly waged a determined effort to get back its operating licence, which the government withdrew more than three months ago alongside those of 26 other betting firms over tax arrears amounting to Sh61 billion – of which SportPesa’s was the largest.
On April 9, KRA’s large taxpayers’ office wrote to Pevans East Africa Ltd, the entity that owns SportPesa, demanding Sh15 billion withholding tax on winnings from punters as from October 18, 2018 to February 19.
Two days later, on April 12, KRA sent the firm another tax demand of Sh8.7 billion, allegedly being the withholding tax on winnings of punters for 2015 and 2016. For long, SportPesa, the most profitable of the betting firms operating in the country, had used a 2014 court case to justify not paying the withholding tax on the winnings of its punters.