How the new 50 per cent tax will impact on charity

In this interactive series, we invite our readers to send in questions to select public figures. Answers will be published in the next print and online editions. This week, SportPesa CEO Ronald Karauri responds to your questions.

Following the budget proposals to impose 50 per cent tax on betting, gaming and gambling, how is this going to impact on customers? Is it the companies or the customers on whom the tax will be imposed?
Andrew Bulinji Were, Khwisero

The proposed tax is not targeted at winnings and therefore will have no impact on customers’ winnings. The 50 per cent uniform tax is targeted at the gross earnings of the gaming, betting and lottery companies currently registered by the Kenya Revenue Authority.

In regard to the 2017/18 budget, betting firms like SportPesa will be taxed as high as 50 per cent. Kindly clarify how the new rate will be executed.

Kevin Kemoi Kachapin, Kapenguria

The Government has proposed 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.

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

Additionally, the industry is still subject to other statutory taxes such as withholding tax, PAYE. If adopted, the implications are clear, a complete business shutdown.

Kenya is said to be one of the countries where betting is growing fastest. Is there anything wrong with this, economically, socially or anything otherwise?
Francis Njuguna, Kibichoi

Globally, gaming has experienced exponential growth. A huge part of the growth is attributable to mobile gaming. The same applies to Kenya where mobile penetration is also growing as evidenced by other facets of communications such as mobile commerce.

Lotteries, sports gaming and competitions have been in existence for five decades in Kenya but adaption to technology has catalysed the growth of the industry.

What’s your view on the proposal in the budget statement presented by National Treasury CS to increase tax levied on betting firms to 50 per cent? Don’t you think the move will strangle betting firms?
Andrew Ratemo, Malindi

The 50 per cent taxation will make the growing industry unviable. If enacted, it will wipe off huge investments in infrastructure, marketing, sports sponsorships, social investments, taxes to the exchequer and other positive multiplier effects.

High tax rates for commodities considered socially undesirable ultimately lead to reduced demand. It also abets the development of an underground economy and promotes tax evasion. International betting companies’ platforms are accessible from Kenya.

Accessibility of the said platforms via mobile and online platforms will in turn promote an illegal bookmaking industry. This will not only negate reason for increased taxation but will also open up a difficult-to-regulate betting environment.

While going about my private business, I have in the past over-heard bettors accuse SportPesa of “hiding sure games away from the bettor”. Is there any truth in that?
Githuku Mungai

Sports betting remains the most transparent form of gaming because outcomes are determined in the sports field. The notion that there is a sure game is unfounded and we have strived to educate customers about such misinformation from unscrupulous individuals.

Betting become a lethal disease on the youths. Did the inventor of this industry come up with the idea to enrich themselves or to give support in nurturing talent through sponsorship, for example?
Oluchina Antony, Eldoret

We recognise that addiction to any form of activity has its impact. Drug abuse, alcohol addiction are harmful to the society. As a gaming company we proactively promote responsible betting and also have provided our input on proposed government regulations that are meant to address illegal gambling and negative effects of gaming.

SportPesa has been blamed for many suicides by young people after failing to become millionaires. Do you shoulder the blame? Francis Ireri, Kibabii University

The proliferation of illegal gambling is behind the rising cases of vices. We have continuously asked the government to publish the proposed regulations. The regulations will encourage responsible betting and protect young and vulnerable in society from the negative effects.

I am happy with the efforts SportPesa has put in to rejuvenate Kenyan football. Is it possible for Sportpesa to get exclusive rights to facilitate broadcasting the Kenya Premier League or even the English Premier League in Kenya so that we have an option? What would that involve?

Dennish Ogal, Kisumu

SportPesa will continue supporting football until we achieve our dream of playing in the World Cup in 2022. Unfortunately, obtaining broadcast rights might not be possible because those rights are usually reserved for broadcast companies because that is a big part of their revenue generation strategy.

I was conned by SportPesa. Using mobile number 0706*****8 I placed a bet ID 1771 with a possible win of Sh1,369. Later on, I received a notification that I had won only Sh285 which eroded any confidence I had in SportPesa. If we need to uphold corporate values for an organisation like SportPesa they too should be responsible to their customers. What can SportPesa do in this case and how many other similar cases do you have, say in a week?

Atege Edwin

Integrity is a corporate governance tenet we dearly uphold in our operations. If the organisers cancel or reschedule a game, we do not cancel your entire bet but provide winnings based on the outcomes of the games that were played. However, our team will reach out to you to establish the circumstances and advise accordingly.

Sir, first let me take this opportunity to thank you for the good work you are doing at SportPesa. My question touches on the company’s corporate social responsibility programme. What are you doing to ensure that under privileged Kenyans, especially those living in children’s homes, get to fully benefit from your corporate social responsibility programmes?

Dan Murugu, Nakuru

At SportPesa we have done our best to ensure that we leave an impact as a responsible corporate citizen. We have visited various homes as part of our CSR and this will continue on a larger scale once our foundation is fully set up.

On a number of occasions, there have been claims that your company is linked to one section of the political divide in the country and that you are a major source of funds to this political group. What is your reaction to these allegations?

Komen Moris, Eldoret

This is not true at all. We are a business which is apolitical and will remain so.

Since inception, your company has been actively engaged in CSR activities across the country especially in the sports arena. Do you think the National Treasury took cognisance of this reality in its latest taxation measures affecting the industry you are in? Are you going to continue with these charitable activities or are you leaving government to intervene using the collected taxes?

Komen Moris, Eldoret

It is quite hard to tell if they considered what we have done and I would like to believe that there is some sort of misunderstanding because we have done what no other corporate has done in the history of the country in sports development.

I am optimistic that the government is willing to engage especially after the President’s comments, so I don’t want to pre-empt the outcome of the process at this point, but any business in a similar situation would definitely need to re-strategise to ensure that they remain viable.

Sir, it’s good that you have come on board to sponsor the Kenyan Premier League. This has developed the game and catered for the players’ welfare. But is there the possibility of supporting the women Premier League too?
Chrispinus Nyaenya, Nyamira

As evidenced by our previous commitments, we are amenable to partner with federations to develop sports. We are open to discuss with the soccer federation on their plans to develop women’s soccer.

However, the new tax proposal will definitely impede these plans.