Kenya Revenue Authority will be the death of betting and gambling firms in Kenya as the government is overstretching its financial muscles to finance its targeted Sh2.81 trillion budget for the 2019/20 financial year.
On Friday, the Betting Control and Licensing Board (BCLB) banned all outdoor and social media advertising of betting services stopped betting promotions between 6 am and 10 pm which is the prime time for betting and gambling enthusiasts.
A revised taxation regime which is to be presented to the National Assembly either through Finance Bill 2019 that will outline the government’s revenue collection measures or the Income Tax (Amendment) Bill 2019, intends to slap a 35 per cent corporate tax on Gross Gaming Revenue (GGR) figures and another 20 per cent withholding tax on any winnings from June when the budget will be read.
While at it KRA has plans underway to levy at least six different forms of tax on the gaming industry discouraging many betting firms while others looking to relocate into favorable environments for their thriving businesses.
Betting industry has grown from about Sh3 billion gross turnover five years ago to over Sh200 billion, with the government reaping about Sh15 billion from the betting companies for the last two years. As at now, the taxman levies 7.5 percent of gaming revenue, lottery tax at 5 percent of the lottery turnover, a gaming tax at 12 percent of the gaming revenue and prize competition tax at 15 percent of the cost of entry into a competition.
The bone of contention is over GGR, the amount gambled minus the winnings returned to players and which is a true measure of the economic value of this extreme sport. Tax experts say charging corporation tax on GGR would sink betting companies, one of the very few sectors that are performing really well.
“There are several grey areas with the gaming tax proposals. The first concern is the issue of double taxation on betting firms, of which even KRA is aware. Corporate tax is levied on profits but it is not clear if withholding tax is first deducted as is the standard practice. Overall, the (gaming tax) law in Kenya is very confusing and does not seem to have been well thought out,” noted Mr. Nikhil Hira, a tax pundit.
National Treasury Chief Administrative Secretary Nelson Gaichuhie said Members of Parliament will have the final say on the matter as they are in charge of legislation.