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Betting tax: Court bars KRA, Sportpesa from deducting 12.5pc

Justice Patrick Otieno ordered betting firm Milestone Gaming Limited and Standard Global East Africa Limited not to deduct the amount from betting fans. [iStockphoto]

The High Court has handed betting fans a major win after stopping the deduction of a 12.5 per cent excise duty on bets.

Justice Patrick Otieno directed the Kenya Revenue Authority (KRA) not to demand the disputed tax until an application filed by a betting enthusiast, Edward Okwama, is heard and decided.

The judge also ordered betting firm Milestone Gaming Limited and Standard Global East Africa Limited not to deduct the amount from betting fans.

"Pending the hearing and determination of the application inter partes, there be and is hereby issued a temporary conservatory order restraining first and second respondents (Milestone and Standard Global) from deducting 12.5 per cent excise duty from the petitioner and other players/ wagers as provided for under paragraph 4A of part II of the first schedule of the Excise Duty Act of 2015," ruled Justice Otieno.

Mr Okwama has sued Milestone, Standard Global, KRA, and the Attorney General.

Milestone offers a betting platform under the Sportpesa brand, while Standard Global offers casinos on Sportpesa's website. In the case, Okwama argues that the current law is unfair as it imposes a blanket deduction irrespective of whether one has won or lost.

He further states that the law does not address refunds of the deducted tax when sports are disrupted due to acts of God, such as rainfalls or storms.

Okwama asserts that there should be income or winnings for excise duty to apply. According to him, it goes against taxation principles to demand tax when there's no income or profit.

"The problematic effect of this provision is that the 12.5 per cent excise duty is levied under paragraph 4A part II on the applicant and other sports betting fans and players when they place a bet or play, notwithstanding if they win or lose their money."

Okwama believes it is discriminatory for the government to demand excise duty on bets when the same principle isn't applied to other sectors.

He laments that it is a double loss for wagers to pay tax and then fail to win.

Conversely, he notes that the current tax regime is overly harsh, resulting in double taxation as betting fans must pay 12.5 per cent as well as 20 per cent withholding tax on winnings.

"The multiplicity of taxes levied on sports fans, players, and enthusiasts in the gaming industry is in contravention of the international general principle of neutrality, efficiency, certainty, simplicity, effectiveness, fairness, and non-double taxation in a tax regime," he says.

Okwama claims over 57 per cent of Kenyan youth above 18 are sports enthusiasts who support local and international football clubs. He argues that the youth place bets for entertainment and economic purposes.

Justice Otieno ordered Okwama to serve the betting firms, KRA and AG within 14 days. The case will be mentioned on September 21.

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