Betting firms face two more gambling taxes in new Bill

Humphrey Wattanga Mulongo takes an oath of office as the new Commissioner General at the Kenya Revenue Authority(KRA) at the Supreme Court of Kenya on August 24, 2023. PHOTO | WILFRED NYANGARESI | NMG

The State is lining up two new taxes on betting firms, escalating the onslaught on the multi-billion shilling industry whose growth appears to defy heavy taxation.

The Betting Control and Licensing Board (BCLB) has proposed a gambling tax which will be charged at the rate of 15 percent of a betting firm’s gross gaming revenue and a further one percent monthly levy on the same revenue.

Betting firms are currently taxed on the gross gaming revenue — turnover minus winnings paid out — at a rate of 15 percent. They also pay corporate tax on profits at a rate of 30 percent.

Read: Court deals State another blow in Sh210 billion tax fight

Kenyans placed a record Sh88.5 billion through online bets in the full year to June 2023, handing the Kenya Revenue Authority (KRA) Sh6.64 billion in excise taxes in the period from the Sh5.1 billion raised a year earlier.

The betting regulator says the new taxes contained in the Gambling Control Bill, 2023 will be used to set up rehabilitation centres and create awareness on the adverse effects of the gambling craze that has since turned into a source of income for unemployed Kenyans.

The growing appeal of gambling among Kenyans, especially unemployed youth, has attracted 10 new entrants to the industry in the current financial year that ends in June next year.

“There shall be a tax to be known as gambling tax chargeable at the rate of fifteen per cent of the gross gambling revenue,” BCLB says in the draft Bill set to be opened for public scrutiny before it can be tabled in Parliament.

Betting firms are still required to pay income tax at the standard rate of 16 percent. The taxes add to annual licence and compliance fees that the firms must pay to get BCLB’s approval.

The KRA also requires the firms to withhold 20 percent of the winnings paid out to punters, adding to the 12.5 percent on every betting stake.

BCLB says that the firms will be required to wire the money from the two taxes on or before the 20th day of the following month.

The proposal is likely to face stiff resistance from betting firms, who have in the recent past successively petitioned Parliament to lower high taxes proposed by the Treasury.

Kenya already has some of the highest tax rates on betting in the world and Parliament has in recent years warned that the growing taxes will turn away investors and hurt the KRA’s collections.

The firms this year successfully petitioned lawmakers to drop the proposed 20 percent excise tax on betting stakes.

The tax was lowered to 12.5 percent. BCLB’s proposal comes at a time when more betting firms have joined the fray, eyeing the billions of shillings that Kenyans stake in the hope of making quick cash amid high rates of unemployment and high cost of living.

The new entrants angling for a share of Kenya’s betting billions are 44bet, Savvybet, Tigonbet, Chapbet, Betmo, Play2Net, Clarity Limited, Betkali and Ealotto.

The State recently changed the law to tighten cash remittance timelines by the firms. The Finance Act, 2023 made it compulsory for betting firms to remit excise duty on betting to the KRA within 24 hours upon close of business day, as the State ups scrutiny on the firms.

Taxes have in the past led to a fall-out between the State and the betting firms, notably SportPesa and Betin, which in turn exited the local market four years ago.

SportPesa has since returned under the brand name Milestone Gaming.

The two firms clashed with the KRA in 2019 over billions of shillings that the taxman demanded, with SportPesa questioning the taxation model.

The 2019 clampdown that saw the deportation of foreign directors of betting firms nearly wiped out the sector following the exit of the then two dominant firms, SportPesa and Betin.

The industry is soaring, with an increasing number of Kenyans taking to gambling in the hope of getting rich quickly

The Kenya FinAccess Household Survey of 2021 showed that the share of adults that gambled increased from 1.9 percent in 2019 to 13.9 percent in 2021, with males in urban areas aged between 18 and 36 years being more likely to bet.

Read: State sets sights on tax breaks to lift research

BCLB data show that bookmakers made revenues of Sh16.3 billion in the year ended June 2022 as casinos booked Sh6.4 billion, offering a glimpse of a lucrative industry which the State is keen to raid in the form of taxes.

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