Bill on tax review a win for gaming firms

Casino gambling. Legislators will review gaming tax. FILE PHOTO

What you need to know:

  • Pambazuka National Lottery was the first casualty of the higher tax regime after closing down in January.
  • Betting firm Sportpesa terminated Sh600 million local sports sponsorship deals following the imposition of the taxes.

The Treasury has caved in to pressure from betting firms and proposed to cut gaming tax from 35 per cent of revenue to 15 per cent.

The proposed lower rate is contained in a bill tabled in the National Assembly by Majority Leader Aden Duale.

“The bill seeks to amend the Act (Betting, Lotteries and Gaming Act) to reduce the amount of betting and lottery tax payable by operators,” the bill reads.

The tax cut proposal, if approved by Parliament, will be a boon to betting firms that viciously opposed the 35 per cent tax — which took effect in January 1.

WINNERS

The firms reckoned that the high taxes would hurt the regulated businesses and create a black market of people taking bets.

Besides the 35 per cent tax on revenues, betting firms pay 30 per cent corporate tax and dedicate 25 per cent of their sales to social causes like sports sponsorship, as a legal requirement, before taking care of winnings and other operating expenses.

The new bill has also cut the share of sales meant for social causes and charity from 25 per cent of sales to at least five per cent, a further relief to the gaming firms. 

But as the Treasury eases the burden on operators, it seeks to transfer the pain to individual gamblers who will have to pay 20 per cent of their winnings to the taxman.

LOBBY
Tax experts say should the bill sail through, the taxman will demand that the firms deduct and remit the 20 per cent withholding tax on every gaming win.

Fred Omondi, a tax consultant at Deloitte, said there should be clarity on how the windfall tax will be charged in cases where gamers win property like cars, as opposed to cash from which it’s easy to deduct the levy.

The lower gaming tax is a reprieve to members of the Association of Gaming Operators Kenya (Agok) who for the past 10 months have persistently sought reduction of the levies.

Before January 1, lotteries were taxed five per cent of their sales, betting firms - bookmakers - at 7.5 per cent, casino gambling at 12 per cent and competitions like raffles at 15 per cent besides other taxes and levies.

FOOTBALL
Pambazuka National Lottery was the first casualty of the higher tax regime after closing down in January, hardly 18 months after it launched.

Kenya’s biggest betting firm Sportpesa terminated Sh600 million local sports sponsorship deals following the imposition of the taxes in a move that pushed football clubs, the Rugby Union and the soccer federation into financial doldrums.

PricewaterhouseCoopers (PwC) in January pointed out that Kenya’s betting tax was among the highest in the world and surpassed that at gaming hubs like the famed Las Vegas.

PwC says the 35 per cent tax on all gambling revenues was high compared to other African countries like South Africa, which charges 9.6 per cent, Rwanda (13 per cent) and Uganda (20 per cent).