Kenya’s government has proposed a massive hike on the existing tax structure on online betting in an attempt to deter underage people from taking part in child gambling. The increased tax structure will also generate revenues to pay for cultural and sporting activities. The Finance Bill 2017 by which tax on gambling and lotteries was increased to 35% from the current 7.5% was signed by President Uhuru Kenyatta on the 21st of June. This tax will apply to all lotteries, betting, and raffle competitions held in the country.
The five-fold increase in gambling tax rates has been greeted with dismay by the country’s betting industry. Operators term the new tax rate as punitive, saying that it will reduce their profitability and cripple the industry. They also say that gambling companies will have to reduce their funding of corporate social activities. Furthermore, the high taxes might even lead to job cuts.
SportPesa – One of the First to Join In
SportPesa, Kenya’s most popular online sports betting site was one of the first companies to respond to the development. The platform announced that it would no longer be able to sponsor sports clubs from January 2018 when the new tax rate would come into effect. This will have an adverse effect on the sporting community since SportsPesa already sponsors the Kenyan Premier League in addition to the AFC Leopards and Gor Mahia clubs. It also supports boxing and ruby in the country. Interestingly, SportsPesa is also one of the sponsors of English League clubs Hull City and Everton.
SportPesa chief executive Ronald Karauri said that while the company would not be able to support Kenyan teams because operations in the country would be affected, it would continue to retain its foreign sponsorship activates. Karuri maintains that no operator in the country will have the means of complying with the tax requirements and that this will drive many of them to closure. The lack of sponsorship at the grassroots level could inflict severe harm on the country’s sporting culture.
Kenya’s Gambling Market
Kenya’s gambling market is second only to South Africa’s and Nigeria’s on the African continent. The African gambling industry is now worth multi-millions of dollars. The industry is also rapidly expanding in Uganda thanks to the launch of a national lottery and the growth of satellite TV and mobile usage.
There is indeed a problem associated with gambling in Kenya and other African countries where unemployment is rife. The use of smartphones for gambling has brought it within the reach of large numbers of people. Unfortunately, many of them are minors. In fact, gamblers use their mobile devices to research on sports teams before placing their bets. Gambling addiction has become a major problem here, and there have been many instances of people committing suicide because they accumulated huge losses on betting.
Kenyan Government Springs Into Action
The Kenyan government had initially intended to raise the tax on gambling to 50%. But limited it to 35% after conducting detailed discussions with all stakeholders. Even so, industry heavyweight such as Karuri maintains that the revised tax structure is unfair. He’s certain it will lead to the demise of the industry.
Further, he also pointed out that such a high tax rate would be counterproductive. This is because it would effectively reduce revenues for the government without dealing with the issue of gambling addiction. The gambling industry already is heavily squeezed thanks to a double taxation structure currently in place.
Opponents of Kenya’s ruling party The National Alliance (TNA) say that President Kenyatta has pushed through the so-called gambling reforms. He has done it without sufficient thought and with a view to influencing the forthcoming national elections. They are scheduled for August 2017. It remains to be seen whether the government is willing to change its stance on this important issue.