Tax Victory for Kenyan Betting Operators
In the latest news from Kenya’s sports betting industry, Nairobi’s Tax Appeals Tribunal has sided with Betin and SportPesa. This is according to reports in the 7 November edition of African news site Business Daily.
The Tribunal is said to have agreed with the operators that the new 20% Kenyan betting tax be applied only to net winnings and not, as was originally stipulated, to bettors’ actual stakes.
Kenya’s Changing Betting Laws
In May 2019 Kenya’s newer, stricter Gambling Bill was unveiled. The aim of this piece of legislation is to protect customers, support healthy gambling behaviour and generate government income in the form of gambling tax revenues. A 10% tax increase actually took effect on 1 July 2018, and the Kenya Revenue Authority (or KRA) has been after local operators to pay up since then.
The KRA’s initial amended definition of winnings was that it was all monies paid to winning bettors, including the return of the original stake. Until all outstanding taxes were paid, the country’s 29 legal bookmakers were suspended by the Betting Control and Licensing Board, or BCLB. This took effect on 1 July 2019.
Companies disagreed with the original amended definition, although SportPesa and Betin did ultimately comply in order to be allowed to resume local operations. Before settling their “outstanding debts” they had been forced to lay off hundreds of members of staff and to suspend their business dealings in Kenya.
Then on 19 September 2019 the Kenyan Parliament’s Finance Committee proposed the 20% excise rate for the 2019/2020 budget. The proposal was voted through almost a week later, on 25 September. This is what SportPesa and Betin appealed against with the Tribunal.
The Tribunal’s Ruling
In addition to saying that the 20% tax applies to net winnings only, the Tax Appeals Tribunal has also ruled that individual bettors must take more responsibility for tax remittance. The onus no longer falls on the operators to the same degree. Insiders explain that the Tribunal’s intention is to shield sportsbooks from prosecution by what is now considered a very aggressive government administration.
The Future Remains Unclear
Although SportPesa and Betin were able to resume their Kenyan activities after settling debts, while the issues that the Tribunal ruled on were still unresolved they could not operator at full capacity. Now, in the wake of the Tribunal’s findings, the BCLB has said that any suspended businesses will need to apply for brand new licences.
As the betting industry in Kenya and around Africa continues to mushroom, bolstered by the mobile technology revolution, authorities continue to seek gambling tax revenue as a way to bolster their coffers. In the past week, the KRA set its sights on Betika and sought Sh1.75 billion (or $17 million) in outstanding taxes.
Since Betika was among the few BCLB-licensed firms that imposed KRA’s original tax amendments, the fact that the KRA has now gone after them could be perceived as very mercenary. Of course, if the monies gained from revenues really do benefit ordinary Kenyan citizens, there will be few criticisms leveled at the government for imposing the taxes. Whether that will indeed be the case remains to be seen.
