Betting companies could soon be paying a tax of 15 percent after the Treasury proposed its reduction from 35 percent. The proposed 15 percent tax will be tabled in the National Assembly by Majority Leader Aden Duale.
Over the past 10 months, members of the Association of the Gaming Operators Kenya (AGOK) have petitioned the government to reduce the tax.
The proposed Bill will amend the Betting, Lotteries and Gaming Act by reducing the amount of lottery and betting tax payable by operators. The tax reduction, if approved by members of parliament, will ease pressure from betting firms that have been paying 35 percent tax since January 1, 2018.
According to gaming operators, high taxes are a threat to their businesses and could encourage a black market for betting. However, the aim of the high tax was to control the rise in gambling that has been hurting young people financially.
Currently, gaming firms pay 35 percent tax on revenues, 30 percent corporate tax, and 25 percent of their sales goes to helping the society through causes such as sports sponsorships. However, the high tax has forced SportPesa to halt its Sh600 million sponsorship to local clubs which has affected the rugby union and football clubs while Pambazuka National Lottery closed down.
Before this, betting companies paid 7.5 percent tax on revenues, lotteries paid 5 percent, casino gambling was charged 12 percent, and competitions such as raffles were charged 15 percent.
Compared to other African countries, Kenya has been charging the highest gaming tax. South Africa charges 9.6 percent, Rwanda charges 13 percent, and Uganda imposes a tax of 20 percent.
Therefore, the proposed Bill solves this problem by reducing the share meant for charity from 25 percent to 5 percent.
Although the proposed Bill seeks to ease the pressure off gaming operators, individuals will bear the burden of paying 20 percent of their earnings to KRA. In other words, betting companies will be expected to deduct and remit 20 percent withholding tax on each gaming win.
However, experts recommend the need to clarify how windfall tax will be charged if the winnings are cars or other non-cash items.