Kenya’s Treasury has recently announced plans to reintroduce a 20% tax on betting and gaming stakes, a move that caused major operators like Sportpesa and Betin to exit the market back in 2019. The proposal is part of the 2022 Finance Bill, which aims to increase the controversial tax from the current 7.5% to 20%. The Treasury justifies this decision as an attempt to bridge the revenue gap caused by inflation. However, this move has reignited debates surrounding the betting tax and its impact on the industry and government revenue.
Reintroducing the 20% Betting Tax:
Kenya’s Treasury has unveiled its 2022 Finance Bill, proposing the reintroduction of a 20% tax on betting and gaming stakes. This tax had previously led to the departure of major operators from the market in 2019. The bill also includes gaming and “prize competitions” under the scope of this levy, highlighting the government’s intention to expand the tax base within the gambling sector.
Revenue Gap and Inflation:
The Treasury’s motivation behind the proposed betting tax increase lies in its aim to bridge the revenue gap caused by growing inflation. Professional services firm KPMG has analyzed the Finance Bill and suggested that the government is likely relying on excise taxes to mitigate the impact of inflation on public finances. However, this approach has sparked concerns regarding the potential negative consequences on the betting industry and its contribution to government revenue.
Controversies Surrounding the Betting Tax:
The 20% betting tax has long been a subject of controversy in Kenya. The initial increase from 10% to 20% in 2019 exacerbated the debate, leading to the exit of prominent operators like Sportpesa and Betin from the market. The higher tax rate was implemented following a protracted dispute over a separate 20% tax on player winnings. This controversial tax has stirred discussions on the sustainability of the betting industry and the government’s approach to taxation.
Impact on Government Revenue:
In 2020, the Parliamentary Finance Committee recognized that the higher betting tax rate had resulted in decreased tax revenue, partly due to the market exits of major operators. As a result, the committee proposed scrapping the tax entirely, a suggestion that was accepted and signed into law by President Uhuru Kenyatta. However, Treasury Secretary Ukur Yatani promptly expressed disagreement with the decision and asserted the need to reinstate the tax. The proposed increase in the 2022 Finance Bill demonstrates the government’s persistent efforts to restore the tax and enhance revenue streams.
Stakeholder Consultation and Adjustments:
The 2022 Finance Bill has undergone a process of consultation with stakeholders. The Parliamentary Departmental Committee on Finance and National Planning is currently gathering evidence from various industry participants until May 4th. This inclusive approach aims to consider the perspectives of operators, such as Sportpesa, and other key stakeholders affected by the proposed tax increase. The outcome of this consultation process will likely shape the final decision regarding the betting tax rate.
Kenya’s Treasury has proposed a significant increase in the betting tax rate, aiming to reintroduce a 20% levy on betting and gaming stakes. This move has sparked debates on the sustainability of the industry, the impact on government revenue, and the overall tax policy within the gambling sector. As stakeholders provide their input during the consultation process, the government faces the challenge of striking a balance between revenue generation and maintaining a favorable environment for the betting industry. The final decision will undoubtedly shape the future of the betting tax landscape in Kenya.