NAIROBI, KENYA: Betting companies should not celebrate the new tax laws approved by the government early this week.
President Uhuru Kenyatta on Tuesday signed into law the finance act 2020 removing 20 per cent excise tax on betting.
Barely two days after the law took effect, Treasury sent a statement to media houses stating that it will re-introduce tax measures in the betting industry in the next six months.
“As noted in the print media, the excise tax was removed through the Finance Act, 2020. The removal of this tax happened during the Committee Stage of the Bill,” noted Ukur Yatani, Cabinet Secretary National Treasury and Planning.
“Following various consultations and in line with the government’s commitment to mitigating against the social vices associated with betting activities, we will be proposing to the National Assembly, the reintroduction of the excise duty on betting within the next six months,” he said.
The government, in 2018, introduced betting tax at the rate of 15 per cent on betting companies and 20 per cent withholding tax on winnings. Further, in 2019, the government introduced excise duty on betting at the rate of 20 per cent of the amount staked.
Following the introduction of the measures, the players in the industry have been petitioning the government to reduce taxation in the industry.
Several betting companies were forced to close shop last year in a longstanding row with the Kenya Revenue Authority (KRA) after Treasury imposed a 10 per cent excise duty on winnings, which was later hiked to 20 per cent.
KRA had been demanding billions of shillings from betting firms based on the gross amount of the payout to punters, including the staked amount.
The industry protested the move, with Sportpesa, which has since closed shop in the country, saying the move would kill local firms.
“With excise tax, a company cannot absorb it. There is little to do but pass it to consumers. There is also a likelihood that people will be betting with companies that operate offshore," said the firm at the time.
"There are a number of these companies that do not have offices here or pay taxes to the government but Kenyans are betting on their platforms, winning and get their winnings sent to their mobile phone lines or other payment platforms. Betting will continue thriving but taxes will be going to other countries.”
Experts had also criticised the tax, saying it created a possible loophole for a spike of unregulated online betting.
“The new tax adds to the heavy tax burden of 15 per cent betting tax, 30 per cent corporation tax and 20 per cent withholding tax on winnings that the industry is under, and could be the straw that finally breaks the camel’s back,” said analysts from business advisory firm KPMG, reacting to the taxation measures.
On Thursday the National Treasury said the government is still committed to freeing the youth from betting traps and by end of the year will move to the house to reintroduce the tax measures.
“Betting activities in the country have adversely affected the social fabric of our society, particularly the youth. In this regard, we wish to reiterate the commitment of government on taxation of this industry so as to contain such vices,” Yatani said.