Before closing down betting firms, Matiang’i ought to listen to them

Interior CS Fred Matiang'i. [Courtesy]

The history of taxation goes as far as the history of humanity itself.

The history of application of acceptable tax to humanity and business is dotted with a lot of back and forth aimed at arriving at a consensus between the governments of the day and either the population or corporate outfits under their jurisdictions or both.

In most sane cases, consensus has been reached and amicable middle grounds arrived at after honest debates on the pros and cons of any taxation regimes being put forward.

In pursuit of sin tax

Any sober government owes their subjects and firms operating under their jurisdiction such an avenue for each party to candidly put their concerns on the table without any hint of high handedness.

Nowhere has such highhandedness been more pronounced than in anything or any service labelled ‘sin tax’ by governments of the day.

In Kenya, the latest entrants into “sin tax” bracket are the betting firms who often are doing clean business and following all the rules of the land set out to them by the very government but who are often hounded every now and then for what appears to be none other than additional tax revenue when all other tax avenues seem to have hit a hilt.

By all means, Interior CS Fred Matiang’is pronouncements on tax compliance is a great directive as no firm should operate in any jurisdiction without the payment of the required set out taxation standards.

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A few years ago when Treasury proposed a 35 per cent tax on betting firms, betting firms clearly demonstrated how such a measure would drive them out of business, the government listened.

If the law had passed, betting firms in Kenya will have been required to pay 35 per cent of their gross revenue to the Kenya Revenue Authority (KRA).

The law also would have required betting firms to pay a further 30 per cent corporation tax on their profits.

Quick mathematics shared with the relevant arms of government indicated that if such a punitive taxation measure was to be put for the top five highest tax paying firms in Kenya, they would all sink into a loss-making territory.

In its place, Treasury and the gaming firms agreed on a compromise of 15 per cent tax on revenue as proposed in after the Betting, Lotteries and Gaming Amendment Act.

In addition, Treasury made a proposal to have 20 per cent of all winnings to be remitted to the taxman.

Before the amendments, all lotteries were taxed at five per cent of their sales, betting firms at 7.5 per cent, casino gambling 12 per cent and competitions like raffles 15 per cent besides other taxes and levies.

To this extent, Dr Matiang’i is right on tax compliance on the agreed taxation levels.

Dr Mating’I is also right on the need to come up with some level of code of conduct in regards to how betting advertisements are done.

Some advertisements come off as unprofessional and as not communicating the whole deal in the bet in the message.

This needs to be reigned on heavily to avoid cases of individuals being misled into thinking of an easy win while as often at times the advertisements seem to communicate.

Why the threats?

Using the same scales of fairness, the issue with Dr Matiang’is directive is how it comes across as a high-handed and without any specific parameters for compliance, vague and generalized threats.

Such directives for more stringent betting law amendment proposals give the business industry mixed signals creating unnecessary uncertainty.

At the end of the day, on one hand the government wants to control betting practices due to the  negative side effects of betting, gambling and gaming on the general population.

This can be done through rationalised advertisement requirements. On the other hand, the government has the tax revenue agenda with the betting firms and would not like to see them close shop.

For the betting firms, the main issue on the table is maximising the profit motive without breaking any laid down laws and regulations.

In the same breath, the laws and regulations should not be punitive and high-handed and reached without any consultations because individuals have invested resources to have the companies up and running.

It only makes sense for both the government and the betting companies to consult and agree on a middle ground.

Ms Nyaboke comments on topical issues.

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Interior CS Fred Matiang'i.Kenya Revenue Authority