The tax on sports betting turnover in Kenya has been removed in an unexpected development of events, after the National Assembly of the country approved the Finance Bill 2020, the budget for the fiscal year starting July 1.
The tax that was part of the 2019/2020 budget of the country was almost certain to be carried over to the next year’s one, when an amendment suggested in the Finance and National Planning Committee in the National Assembly led to its removal. The attempt to cut the 20% tax on player winnings to 10% was unsuccessful, though.
Turnover Tax Depleting Operators
The controversial excise tax of 20% on stakes that forced SportPesa out of the market was all set to be adopted into the annual budget, when concerns regarding its indirect effect on sponsorship money for local clubs were raised in the committee, as by strapping operators out of cash, the tax had an inverse effect on their financial ability to support sports entities.
The concerns expressed prompted members of the committee to re-evaluate the impact of the tax, realizing its high level was forcing bettors to foreign sports book operators that were not subjected to tax and were denying revenue to the government. The committee members decided that by removing the excessive tax they will be able to reverse the negative effects on the industry that reacted by closing betting shops across the country, forcing many people to lose their jobs.
Winnings Tax Remains Unchanged
The committee members were also pointed to the high level of the tax on player winnings, 20%, but the committee relied on the fact that there was no negative impact from this tax on betting operators and winnings were bearing little to no expenditure on behalf of the bettor, thereby refusing to cut the tax to 10%.
Unsuccessful was also the attempt to exempt the betting industry from the new 1.5% digital services tax, aimed at non-resident companies generating revenue from Kenya, as the committee found out the tax would be offset against other taxes.
During the debate in the National Assembly, the Finance and National Planning Committee Chair Joseph Kirui Limo re-iterated the conclusion of the committee arguing that the reduction in taxation would actually lead to increase in revenue and reverse the downward trend at the moment as revenue was plunging.
The gambling regulatory body in Kenya, the Betting Control & Licensing Board (BCLB), suspended the licenses of gambling operators last summer, over claims they owed the government hundreds of millions of dollars in unpaid taxes. Among the licenses suspended was the one of the sports book operator SportPesa, who reacted by cancelling all sponsorship deals with local sports clubs, closing its betting shops and laying off more than 400 employees.
The removal of the tax has one hurdle to overcome, as the bill must be signed into law by Kenya President Kenyatta, who is on record stating that he is willing to ban the whole activity altogether if the National Assembly presents him with such a bill.