In the latest development concerning Kenya’s gambling industry, a parliamentary committee has opted to maintain the existing excise tax on betting stakes at 7.5% and has rejected the proposal to introduce a new tax on gambling advertising. These decisions represent a departure from the Treasury’s earlier version of the bill, which had suggested raising the excise tax on betting stakes to 20% and imposing a 15% tax on gambling advertising expenditure.
Stability Over Tax Hikes:
The parliamentary committee argued that it would be unwise to increase the excise tax on betting stakes to 20% as initially proposed. This decision was rooted in the fact that the current 7.5% rate had only been in effect for less than a year, making it too soon to assess its effectiveness. The committee emphasized the need to provide the sector with sufficient time before considering any tax hikes. Consequently, they recommended the removal of the proposed amendment.
Regulations Already in Place:
Regarding the tax on advertising spend related to gambling, the committee pointed out that Kenya already had regulations in place governing the advertising of gaming activities within the country. In light of these existing regulations, the committee deemed it unnecessary to indirectly regulate gambling advertisements through taxation. This stance reflects a desire to avoid redundancy in the regulatory framework.
History of Tax Rate Fluctuations:
The debate over taxation in Kenya’s gambling industry has seen significant fluctuations in tax rates in recent years. The Treasury had previously increased the tax on betting stakes from 10% to 20% in 2019, which led to conflicts over efforts to both raise and lower the tax rate. The subsequent reduction of the tax rate to 7.5% in the Finance Act, 2021, was influenced by market exits by prominent operators like Sportpesa and Betin following the initial increase to 20%.
A Controversial Tax’s Journey:
Notably, in 2020, the finance committee highlighted that tax revenue had decreased after the tax rate increase, partly due to operator withdrawals from the market. Consequently, parliament decided to repeal the tax entirely, a move supported by President Uhuru Kenyatta. However, Treasury Secretary Ukur Yatani voiced opposition to this decision, indicating the government’s intent to reinstate the tax.
Committee’s Response to Stakeholders:
The finance committee’s decision to reduce the stake levy to 7.5% stemmed from consultations with various stakeholders, including Sportpesa. The operator, which resumed operations in Kenya in November 2020, contended that the tax on stakes contradicted the country’s excise duty law. Ultimately, the 7.5% rate was incorporated into the final version of the Finance Bill.
Future Legislative Process:
The bill will now proceed to the National Assembly, where it could potentially undergo further revisions. If it receives approval from both the National Assembly and the Senate, it may ultimately be signed into law by President Uhuru Kenyatta.
The committee’s decisions to maintain the current excise tax rate on betting stakes at 7.5% and to reject a new advertising tax underscore the complexities surrounding taxation in Kenya’s gaming industry. These choices reflect a desire for stability and a measured approach to taxation, considering the sector’s recent history of tax rate fluctuations. The bill’s journey through the legislative process will be closely watched as it may shape the future of taxation in Kenya’s gambling landscape.