Betting firms warn proposed tax will drive up black market
Sports betting firms now want the government to scrap the excise duty on the amount staked to avert the gradually sprouting offshore betting that could see the government lose revenue earned on its own digital space.
In 2021, the government introduced a 7.5 per cent excise duty on punters’ cash which is deductible even before placing any bet to discourage the activity, especially among youths who take loans to finance their betting addictions.
But the firms now say that the impact of the duty has seen several companies line up to register their businesses in neighbouring countries, to evade taxes, while retaining their customer base in Kenya.
“The local market is likely to be infiltrated by online operators from offshore jurisdictions. Unchecked transactions which will not be regulated may cause social harm and loss of the much-needed revenue by the government,” Betting Companies Consortium said in a submission before the Kuria Kimani-led Finance committee deliberating on the proposed Finance Bill 2023.
The consortium comprises sports betting firms like Milestone Games Limited (Sportpesa), Nanovas International (K) Ltd (BetPawa), Reys and Meys Ltd, Kensen Ltd, and Albertyne Ltd.
The firms further argue the excise duty contradicts section 9 of the Excise Duty Act which provides that the excisable value of excisable services shall be “fee, commission, or charge payable for the services, or open market value of the services.”
Betway Kenya, for instance, officially closed its operations in Kenya on May 16 2023 and moved to Malawi but it is still accessible online. Bet365, the UK-registered gambling company, also has a digital presence in the country.
Importance of securing sector
With the rise in fintech, gamblers find it easy to bet with any site through Paypal or Visa cards. “It is important for us to secure this sector. When you’ve got this kind of infiltration by external forced, none of us wins. Neither the exchequer collects any revenues nor the betting companies,” says Robert Waweru, partner at Ichiban Tax and Advisory firm.
Betting is a highly squeezed sector by taxes and levies amid a massive push by Kenya Revenue Authority (KRA) to ensure prompt compliance through technology. The consortium says the revenue by the gaming industry has slid downwards to Sh2.4 billion by 2022/23 from Sh7 billion in 2018/19, primarily attributed to increases in taxes.
Gamblers pay a 20 per cent tax on winnings that betting firms must withhold and remit to the KRA, meaning if one wins Sh1,000, they will receive Sh800.
The withholding tax is in addition to corporate income taxes (30 per cent) levied on the betting businesses, a 15 per cent betting tax on Gross Gaming Revenue (GGR), and 16 per cent Value-Added-Tax (VAT).
“Taxes are necessary but that again doesn’t mean we use taxes as the full scale weapon to fight the evil,” says Ruth Ndichu, Head of Tax Policy at Sportpesa.
To tighten the noose further, the government has given digital betting and gambling companies up to the end of June to integrate their data with the KRA’s real-time system or miss license renewal by the Betting Control and Licensing Board (BCLB). Those hooked into the system are required to remit excise and withholding tax on a daily basis instead of monthly.