Lawmakers of the Kenyan Finance and National Planning Committee agreed to institute new gaming legislation to combat problem gambling among its younger generation. The Kenyan Tax Laws (Amendment) Bill 2018 includes a 10% tax on lottery winnings and sports bets winnings.
Under terms of the proposed Tax Laws (Amendment) Bill 2018, the revenue tax on gaming operators was cut to 15%. Previously, the gaming tax was 35%.
The 2018 bill would reverse the effects of the Finance Law 2017, which was signed by Kenyan President Uhuru Kenyatta on June 24, 2017. The 2017 law changed the sportsbook tax rate from 7.5% to 35%.
With the bill passed through the Finance and National Planning Committee, the full National Assembly will next have a vote on the legislation. The National Assembly has 349 members.
Criticism of 10% Gaming Tax
Kenya’s Labour and Social Welfare Committee disagreed with the Finance Committee’s plan. The Labour Committee wanted a 20% tax imposed on gambling winnings.
Joseph Limo, who serves as the chairman of the Finance and National Planning Committee, said in a reply to criticism on the limited 10% tax, “To be able to increase the tax base to also include winnings that form approximately 88% of all the revenues generated from these activities and because this is the first time taxation is being introduced, the [Finance and National Planning] Committee was of the view that 20% is too high and hence the adoption of 10% for both residents and non-residents.”
Some have criticized the tax as an imposition on average gamblers, as the tax burden is being shifted from the gaming companies to lottery and sports bettors. Officials want to lower the temptation to gamble on the lottery and sporting events, in the hopes that fewer Kenyans see gambling as a way out of poverty.
15% Tax on Gaming Groups
The tax on gaming groups is considered a general all-around policy, which bring Kenyan gaming taxes more in line with global taxation rates on gambling companies. Gaming operators argue that they cannot compete with illegal offshore gaming operators, if they must pay a 35% tax.
It is an argument which would be familiar with lawmakers in Australia, the United Kingdom, and the United States. Currently, those discussing US sports betting laws say that a 1% integrity fee on sportsbooks would lower the margin for competing with offshore bookmaker sites.
Why Lower Corporate Betting Taxes?
Four Australian states imposed an 8% to 15% additional Point-of-Consumption tax on online gaming operators, which caused loud howls from executives. The same arguements were heard several years ago when the UK imposed a 15% Point-of-Consumption tax. The Czech Republic could not attract online betting companies until it lowered its 30% online gaming tax.
In each case, the gaming groups claimed that additional taxes would harm their businesses and drive customers to illegal gaming operators, who have to pay no tax. Still, lowering the gaming tax on sportsbooks and lottery companies is certain to be controversial, since it is a huge boon for the gaming executives being enriched off of problem gambling in the first place.
Sportspesa Ends Sports Promotions
Proponents of the current action argue that the lowering of taxes eliminates a huge mistake the National Assembly and Kenyan President Uhuru Kenyatta made last year. In 2017, SportsPesa ended its corporate sponsorships of Kenyan football clubs, due to a tax hike on gambling. Ronald Karauri, the founder and CEO of SportsPesa, announced in June 2017 that his company would stop paying for Kenyan Premier League (KPL) advertising on January 1, 2018 after a tax hike from 7.5% to 35%.
Ronald Karauri directly cited the sports betting tax in discussing the end of SportsPesa sponsorships. Kaurari said he was, “Giving notice to clubs and unions that from January 1 we will withdraw all sponsorships….to plan accordingly.”
As the country’s largest sportsbook, SportsPesa’s announcement was a huge blow to the KPL. Since the decision went into effect back in January, it created a crisis of sorts for the Kenyan National Assembly.
Problem Gambling Tax Lowered
Business Daily Africa reported that the lowering of Kenyan gambling taxes would include the lowering of the percentage of gaming revenues which must go to problem gambling initiatives. The rate of taxes goes from 25% to 5%.
In a time when Kenyan youth are increasingly addicted to gambling, it is hard to justify an 80% reduction in the amount of revenues going toward problem gambling help resources. The argument is the funds will come from the taxes imposed on lottery and sportsbook winners.
The standard corporate tax rate is 30% in Kenya right now for non-gaming corporations.