Kenya’s 2022 Finance Bill, recently published by the Treasury, has stirred controversy by proposing a significant increase in the tax on betting stakes from 7.5% to 20%. This move, along with the inclusion of gaming and “prize competitions” within its purview, has sparked debate among industry stakeholders and experts. Additionally, the bill seeks to introduce a 15% excise tax on gambling advertisements.
A Bid to Address Fiscal Challenges:
The government’s motivation behind these proposed tax amendments is attributed to the need to address fiscal challenges, particularly the revenue gap exacerbated by rising inflation. The decision to target excise taxes, including the controversial stake tax, is seen as an attempt to bolster government revenue streams.
Controversial History of the Stake Tax:
The tax on betting stakes in Kenya has been a contentious issue for several years. The situation escalated in 2019 when the rate was doubled from 10% to 20%, following a protracted dispute over a separate 20% tax on player winnings. This sharp increase led to industry leaders like Sportpesa and Betin withdrawing their services from the market.
Changing Fortunes of the Stake Tax:
Surprisingly, in 2020, the Parliamentary Finance Committee reported that the higher tax rate had resulted in reduced tax revenue, partly due to these market exits. Consequently, the committee recommended the complete abolition of the stake tax, a recommendation that was accepted and signed into law by President Uhuru Kenyatta.
Revisiting the Tax:
The Treasury secretary, Ukur Yatani, promptly expressed the view that scrapping the tax was a mistake, signaling the government’s intention to reintroduce it. This initiative gained momentum with the 2021 Finance Bill, which once again proposed an excise duty of 20% on betting stakes. However, the Finance Committee modified this proposal, lowering the stake levy to 7.5%.
Broader Tax Base Inclusion:
The 2021 bill also expanded the tax base to include lotteries, which had previously enjoyed an exemption.
Current Status of the 2022 Finance Bill:
The 2022 Finance Bill has recently received its first reading and has been forwarded to the Departmental Committee on Finance and National Planning. This committee is set to engage with industry stakeholders until May 4th to gather insights and perspectives on the proposed tax amendments.
Kenya’s gaming industry faces a period of uncertainty as the government seeks to revisit and potentially increase the controversial tax on betting stakes. This move, coupled with the proposed tax on gambling advertisements, has generated debate and apprehension within the sector. As the Departmental Committee on Finance and National Planning gathers input from various stakeholders, the ultimate fate of these tax amendments will be closely watched by both the gaming industry and the broader economy.