The taxes on gaming too punitive, it will kill business

(Photo: Courtesy)

The gaming industry is staring at the skulls that will be its disposition starting from 1st January 2018 due to the imposed 35 per cent tax on gross revenue across gaming sector.

Currently the industry pays across the sector a 30 per cent corporation tax as well as individual sub-sector taxes of -gaming 12 per cent, Betting 7.5 per cent, Lotteries 5 per cent and prize completion of 15 per cent.

The 2017 Finance Bill has insensibly hiked the above taxes by 191 per cent, 367 per cent 600 per cent and 133 per cent respectively to a uniform 35 per cent tax across the board without taking into consideration the compulsory 30 per cent corporation tax and the respective gaming sector's diverse business operation models.

The question that begs answers is: what bottom line in quantitative figures is the government looking at that informed the decision to slap the sector with these taxes? Industry bottom line?

Respective sub-sector bottom line? Number of youth affected? Was it a fair approach taking into consideration Industry players have not been engaged in arriving at this new tax?

Furthermore, the Kenya Revenue Authority, Betting Control & Licensing Board as well as the 11th Parliamentary Finance committee had advised parliament against raising this tax. In addition, stating that it is a measure at protecting the youth is misplaced as responsible gaming evidence making decision has no relation to tax matters. This tax imposition will have counter effects. Jobs will be lost; none will be created as establishments revise their operational costs.

Currently, casinos (entertainment), charity sweepstakes (charity projects), Jockey Club (entertainment and only horse racing sport in EA) which fall under gaming and lotteries will suffer most as they employ hundreds of thousands of staff. What the decision to impose this punitive tax did not consider is that responsible gaming is a totally different subject.

The model used to arrive at the new tax figure is ill advised and very inconsiderate. Actually Offensive. In the spirit of transparency and accountability - of which the constitution purposes to uphold - I would like to request the Betting Control and Licensing Board who are our regulators and who are well informed of all sector operational models, to inform the public and the government on each sub-sector business model.

Further to this, I would like to request the Kenya Revenue Authority to publish a sector by sector contribution to the Exchequer for all to be able to see and understand the respective gaming sector contributions.

This article gives you the glaring industry expected financial projections in percentages from within the gaming industry including the new 35 per cent tax to take effect in 2018 and the current 12 per cent, 7.5 per cent and 5 per cent as well as corporation tax for the public information consumption.

Under the 2017 tax regime, there is a possibility of earning corporation tax. During submissions to the Parliamentary Finance Committee, KRA Commissioner General Mr John Njiraini stated that the gaming industry in the year 2016 contributed to the exchequer Sh4.6 billion in corporation taxes only.

This did not include PAYE, 12 per cent on gaming, 5 per cent of lotteries or 7.5 per cent of betting. In 2017 financial year, KRA will collect far much more because the 4 revenue taxes of 12 per cent, 5 per cent, 12 per cent and 15 per cent will be summed up together with the 30 per cent corporation tax, PAYE and import duties to give the total sector contribution to the Exchequer.

We are talking about a rough estimate of between Sh10-15 billion tax contribution by the sector for the current year 2017 that the exchequer risks losing should the industry go down due to heavy taxation. The goose that is currently laying the golden egg will have been killed by the Finance Act 2017.

The 2018 taxes on revenue are preposterous, unrealistic and go against the grain of job creating and revenue collection that we need in our country for purposes of development.

Ms Kiragu is Director – Golden Key Casino
[email protected]