Kenya’s current 35% tax on betting and gaming services could be scrapped by the government in favor of a 15% one under growing pressure from the country’s gambling industry.
Local media reports that National Assembly Majority Leader Aden Duale submitted earlier this week the Tax Laws (Amendment) Bill 2018, which seeks to lower the current tax rate and to add several more amendments to the country’s existing gambling taxation law, including a tax on betting and gaming winnings.
Kenya’s new taxation regime was approved by the country’s government and president, Uhuru Kenyatta, last summer and came into effect on January 1, 2018. Under it, all gambling services, including sports betting, casino gaming, and raffles, are taxed at a flat rate of 35%.
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Previously, licensed bookmakers paid a 7.5% tax, while casino operators were taxed at 12%. Providers of raffles and similar competitions paid a 15% tax.
The new 35% tax immediately sparked controversy and drew criticism from gambling industry stakeholders, who condemned it as an extremely burdensome one. In addition to that tax, licensed gambling operators are also required to pay a 30% corporate tax and to contribute 25% of all sales proceeds to good causes.
The industry expressed concerns that there would be operators that would not be able to survive the new taxation regime. Pambazuka National Lottery went out of business on January 7, or less than a week after the new tax law came into effect. The operator cited the high tax rate as the reason for its demise.
The implementation of the new tax rate also resulted in Kenyan sports betting operator SportPesa withdrawing KES600 million (nearly $6 million) worth of local sports sponsorships.
Tax on Winnings
The new bill calls for the introduction of a tax on all winnings from gambling services. If the legislative piece gains the necessary support, it would require gaming and betting operators to deduct 20% on every win scored by their customers.
Tax consultants noted that the government should clarify how exactly the tax on winnings will be charged when customers win cars and other non-monetary prizes as opposed to cash prizes, from which the required tax is much easier to deduct.
Kenya had previously charged betting winnings, but dropped that tax in 2016 as numerous hurdles hampered its proper implementation. The new proposal for taxing gambling winnings aims to reduce interest in such activities among Kenyans, particularly among the younger members of the African country’s population.
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Sports betting, in particular, has grown significantly in popularity in Kenya over the past several years. The growth has been attributed primarily to the widespread penetration of smartphones and the launch of mobile-based services that allow customers to bet and withdraw winnings via their mobile phones without having to provide bank account details.