The Kenyan parliament has finally given in to the demands of the gambling industry, reducing the exorbitant tax on betting and gaming services.
Under the agreement the tax rate will be slashed from 35% to 15%, which should make local betting firms much more competitive with those based offshore.
A detailed report into the Finance Bill 2018, declared the changes will safeguard the economic and social contributions of the Kenyan gambling industry to the people.
To this effect, the committee on Finance and National Planning indicated in the report that “Section 29A of the Betting, Lotteries, and Gaming Act is amended in subsection 1 by deleting the expression thirty-five and substituting therefor the expression fifteen.”
President Uhuru Kenyatta signed the 35 per cent service tax into law in June 2017 and it became effective on January 1, 2018. This was in contrary to a proposal by parliament to maintain the tax at 15 per cent as in the Finance Bill 2017.
The new tax cut, if effected, will sustain the Kenyan gaming industry says the Association of Gaming Operators of Kenya. The operators had always maintained a position that the increase in the taxes to 35% would decrease their gross margin from 7% to 4.5%.
Aside from the betting tax, the operators spent 30% of revenue on corporation tax and are obliged by law to set aside 25% of earnings to social responsibilities, including sponsoring sports teams.
However, with this new proposal, the lawmakers have also reduced the 25% of earnings dedicated to social causes to at least 5%.
The gambling operators have been agitating for the reintroduction of the previous tax regime, which was between 5 and 15% across the board, or at least a more reasonable taxation and not the current 35% across the board, straining their business.
Before the introduction of the 35% tax rate, sports betting was taxed at 7.5%, lottery paid 5% and casinos taxed 12%. There was also a 15% tax on price competition.
The rise in taxes affected the betting companies’ social causes with the Boxing Association of Kenya indicating that sponsorship of the sport reduced when taxes were raised.
For example, one of the giant betting firms in the country, SportPesa, called all local sports sponsorship deals off after the taxes went up.
SportPesa sponsored the Kenyan Premier League and Football Kenya Federation. They were also the official shirt sponsors of clubs like Nakuru All-Stars, Gor Mahia, and AFC Leopards.
They have however indicated that they will review their sponsorship withdrawal if the tax limits are reduced.
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