Betting firms lose in withholding tax battle

The betting industry registered a major loss yesterday after the High Court ruled in favour of the Kenya Revenue Authority in a case where the players wanted to pay lower tax amounts.

This is after the High Court ruled that there is nothing unconstitutional about taxing winnings from betting. A betting enthusiast had last year moved to court arguing winnings were not an income and should not be subjected to taxation.

George Lesaloi Selelo had on October 12, 2018, filed a petition before the High Court in Nanyuki seeking for orders of declaration that winnings from betting, lotteries and gaming are not income hence should not be subject to tax under the Income Tax Act.

His petition was consolidated with that of Betway that had wanted clarification on the definition of ‘winnings’ as defined under Section 2(b) of the Finance Act 2018.

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The government had last year imposed a 20 per cent withholding tax on winnings. The industry, however, disagreed with the definition of ‘winnings’ given by the National Treasury.

Staked amount

Treasury believes that the total amount to the gamers, including the amount they had bet, should be subjected to a 20 per cent withholding tax while the industry says KRA should only tax the winnings. Betting firms, as well as some of their customers, believed that winnings should not include the staked amount.

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High Court Judge Hatari Waweru sitting in Nanyuki delivered the judgment yesterday dismissing the petitions. “I find no merit in these two petitions and they are hereby dismissed,” said the judge.

“The petitioners have challenged the definition of winnings in Section Two of the Income Tax Act amended by the Finance Act, 2018. The intention of the legislation in enacting a new definition was to widen the tax base. I do not find ambiguity or un-constitutionalism in the new definition of winnings at all.”

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“Taxes are not meant to be fair. They are always a burden that the society must bear, and which members of the society must share equitably. It is a constitutional obligation by legislation. The impugned provision of the Finance Act 2018 and other laws are thus not unconstitutional.”

Some betting firms have started deducting the 20 per cent withholding tax in a bid to comply with directives from the Betting Licensing and Control Board and KRA. There are other cases in court including one at the Tax Appeals Tribunal challenging the different taxation measures as well as the definition of winnings.  

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