KRA tax collection from betting firms jumps 50pc

Saturday, January 28th, 2023 05:30 | By
KRA office. PHOTO/Courtesy

Kenya Revenue Authority (KRA) earnings from betting firms have increased by 50 per cent, just less than a month since the rolling out of real-time tax remittance, as the authority scales up measures to beat revenue collection targets.

This increment follows an aggressive hunt that saw the taxman integrate into its system a total of 35 major betting firms, which it says contribute an estimated 90 per cent of the total taxes remitted by the betting sector.

“From our analysis, from every one of them (betting firms) we have onboarded, there is significant growth in revenue. Some have grown with a high as 50 per cent of that revenue, telling us we have great potential when we continue,” says KRA Commissioner General Githii Mburu.

Those hooked include 17 big operators in the country, with KRA still on the lookout to plug in other small players, accounting for the remaining sector’s 10 per cent remittance. The betting sector is divergent but dominated mainly by online sports betting firms like Sportpesa, Betin, Betika, Odibet, Betika, Mozzartbet and Betway, among others.

Investment gains

President William Ruto’s administration is banking on intensified tax mobilisation from investment gains, betting companies, rental property, and Value-Added Tax (VAT) to raise Sh3 trillion in tax revenue to help fund the upcoming 2023/24 budget.

As part of the tax base expansion plan, KRA will depend more on technology to source information, identifying people who are earning and living large but paying little or no taxes. The new real-time system, which is a deviation from the previous style where betting firms were taxed monthly and based on what they declared, requires the operators to compute and pay taxes due every day. It allows KRA to access all information around betting transactions, including the amount of money staked and won by punters, all of which dictates the amount remitted depending on the existing taxation rates.

The agency currently takes a withholding tax that is calculated at 20 per cent on a win after deducting the amount staked. There is also a 7.5 per cent tax on every betting stake that was as re-introduced in the finance bill 2022.

In the year ended June 2022, before technology integration, the taxman Sh5.7 billion in Withholding Tax (WHT) from winning bets. This represents a drastic drop from Sh7.1 billion WHT collected a year earlier, highlighting either a decline in betting placed due to tax costs or reduced winning by the punters. Based on these figures, it means KRA has collected an additional WHT of Sh2.85 billion from the betting sector by using the two-weeks old new technology method.

Tax hikes

The rising number of betting firms and lotteries licensed to operate in Kenya, which increased to hit 132 as of September 2022 from 100 in June, points out how the industry is booming and attracting more players despite tax hikes aimed at curbing the business.

In September alone, KRA cleared 105 betting firms paving the way for the issuance of their operating licences by the Betting Control and Licensing Board (BCLB) in the financial year ending June 2023.

The betting industry has been expanding quickly over the years, supported by internet penetration, an increase in mobile phones, and digital lending and payment options that have enabled gamblers, especially youths, to easily try and multiply their earnings.

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