alexa CS Matiang'i right on betting tax, wrong on closure - Daily Nation

CS Matiang'i right on betting tax, wrong on closure

Wednesday April 3 2019

BETTING

Betting firm Betin's branch in Nairobi Town. Betting companies are required to be tax compliant. PHOTO | FILE | NATION MEDIA GROUP 

EUGENIA NYABOKE
By EUGENIA NYABOKE
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Taxation goes as far as the history of humanity itself.

The history of application of acceptable tax to humanity and business is dotted with a lot of back and forth aimed at arriving at a consensus between the governments of the day and either the population or corporate outfits under their jurisdictions or both.

In most sane cases, consensus has been reached and an amicable middle ground arrived at after honest debates on the pros and cons of any taxation regimes being put forward.

Any sober government owes its subjects and firms operating under its jurisdiction such an avenue for each party to candidly put their concerns on the table without a hint of high-handedness.

But nowhere has such high-handedness been more pronounced than in anything or any service labelled ‘sin tax’ by governments of the day.

COMPLIANCE

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In Kenya, the latest entrants into the ‘sin tax’ bracket are the betting firms, who often are doing clean business and following all the rules of the land set by the very government, but who are often hounded every now and then for what appears to be none other than additional tax revenue when all other taxation avenues have been milked to the hilt.

By all means, Interior Cabinet Secretary Fred Matiang’i’s pronouncement on tax compliance this week was a great directive, as no firm should operate in any jurisdiction without the payment of the required taxation standards.

A few years ago when the National Treasury proposed tax on betting firms, the companies clearly demonstrated how such a measure would run them out of business. And the government listened.

PUNITIVE TAX

If the law had been passed, betting firms in Kenya would have been required to pay 35 per cent of their gross revenue to the Kenya Revenue Authority (KRA).

The law also would have required betting firms to pay a further 30 per cent corporation tax on their profits.

Quick mathematics shared with the relevant arms of government indicated that, if such a punitive taxation measure was to be put for the top five highest taxpaying firms in Kenya, they would all sink into loss-making territory.

In its place, the Treasury and the gaming firms agreed on a compromise of 15 per cent tax on revenue as proposed in the Betting, Lotteries and Gaming Amendment Act.

In addition, the Treasury made a proposal to have 20 per cent of all winnings to be remitted to the taxman.

ETHICAL ADs

Before the amendments, all lotteries were taxed at five per cent of their sales, betting firms at 7.5 per cent, casino gambling 12 per cent and competitions such as raffles 15 per cent, besides other taxes and levies.

To this extent, Dr Matiang’i is right on tax compliance on the agreed taxation levels.

He is also right on the need to come up with some level of code of conduct with regard to how betting advertisements are done.

Some advertisements appear to be unprofessional and not communicating the whole deal in the bet that they are advertising.

This needs to be reined in to avoid cases of individuals being misled into thinking of pocketing easy money in such amounts and as often as the advertisements seem to assure them.

CONSULTATION

Using the same scales of fairness, the issue with Dr Matiang’i’s directive is that it comes across as high-handed and without any specific parameters for compliance and comprising vague and generalised threats.

Such directives for more stringent betting law amendment proposals give the industry mixed signals, creating unnecessary uncertainty.

At the end of the day, on one hand the government wants to control betting practices due to the negative side effects of betting, gambling and gaming on the general population. But this can be done through rationalised advertisement requirements.

On the other hand, the government has the tax revenue agenda with the betting firms and would not like to see them close shop.

For the betting firms, the main issue on the table is maximising profits without breaking any laid-down laws and regulations.

In the same breath, the laws and regulations should not be punitive and high-handed and reached without the relevant consultations, because individuals have invested resources to have the companies up and running.

It only makes sense for both the government and the betting companies to — once again — consult and reach a middle ground.

Ms Nyaboke comments on topical issues. [email protected]

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