Immediate former chairman of Betting Control and Licensing Board (BCLB) Kimani Kung’u says betting firms did not make Sh200 billion as reported by some Government officials.
He faulted the revenue and tax compliance status of betting firms as recently cited by Interior Cabinet Secretary Fred Matiang’i as reasons behind the cancellation of licences.
Speaking in an interview with a local radio station, Kung’u said the revenue of betting companies at the end of 2018 was between Sh20 billion and Sh25 billion and there is no way that figure could have risen to Sh200 billion just six months down the line.
“...People have bundled around some figures of Sh200 billion. You have to differentiate between revenue and input...,” said Kung’u.
“We did our due diligence on all of them (betting firms) and I don’t think we would have given any licences to people (firms) who are not fit.”
The figure is a tenth of Sh200 billion that Matiang’i said betting firms make without giving any reference or proof. The huge disparity between the revenue figures and tax submitted to Kenya Revenue Authority (KRA) saw Matiang’i order for the shutting down and cancellation of licences of 27 betting firms on grounds of tax avoidance.
The decision saw two of the biggest names in the gaming industry—Sportpesa and Betin--have their licences revoked and operations ground to a halt.
According to Kung’u, Sportpesa and Betin paid Sh10 billion as tax with Sportpesa paying over Sh6 billion as tax and other regulatory fee requirements.
The two betting firms have maintained that they are tax compliant and that they did not know why the licences were being withdrawn. The matter is pending before the courts.
“You are not only killing the goose, you are eating the egg then you slaughter the goose and when the goose is dead you are asking where are the eggs,” said Kung’u in reference to the delicensing of gaming firms, the betting revenue figures from the government and the requirement to comply to tax requirements based on the same contested figures.
The issue of revenues that the betting firms make has been contentious from mid last year.
Withholding tax rate
While the Government maintains that betting firms made Sh200 billion last year, betting firms have insisted that the estimation is wrong because it included betting money—the money those who bet deposit in their wallets to bet, also called stakes.
Gaming tax best practices across the world are such that the government only takes a certain percentage of the winnings and not the stake. For example, if a gamer puts a stake of Sh1,000 in a game that has odds of 1.13X and wins, the person only gets Sh130 as winnings.
Any tax regime will only tax the Sh130 which at the current withholding tax rate which is 20 percent will mean that KRA takes Sh26 and the gamer takes home Sh104 and his stake of Sh1,000 bringing it to a total of Sh1104.
Speaking at the same radio show, Senator Cleophas Malala said it was curious that while the government was busy shutting down some betting firms for what it termed as a gambling vice, the same government was licensing some more gambling firms.
“You close others and licensing others while saying that gambling is bad,” said Senator Malala.
Malala challenged Matiang’i to name directors of some of the companies that were licensed recently. The senator also called on the Government to uphold the rule of law saying that the government disobeyed a court order.
Human rights activist Brian Weke, who also participated in the radio interview claimed top officials in government were killing some betting firms to create room for theirs.