Authorities in Kenya are proposing to bring back the controversial betting tax rate of 20% which forced Sportpesa out of the country in 2019. The change is introduced via the 2022 Financial Bill.
Amendments to the Excise Duty Act 2015
The 2022 Financial Bill, which already passed its first reading at the National Assembly on April 12 and was submitted to the Departmental Committee on Finance and National Planning, seeks to amend the First Schedule to the Excise Duty Act 2015 and raise the excise tax rate on a number of products and services, including the current rate on betting from 7.5% to 20%. The increase in the excise tax will apply to betting, gaming, prize competitions, and lotteries.
A new 15% tax on fees charged by televisions, print media, billboards, and radio stations for gambling and gaming advertisements proposed by the government will impact the gambling industry further.
The proposed tax hikes are part of a package that is meant to generate additional revenue of KES50.4 billion ($433.4 million), Treasury Secretary Ukur Yatani stated in his budget speech, but according to Dutch-based Big Four accounting organization KPMG, the amount is relatively small compared to the overall budget of over KES2 trillion ($17.2 billion) and “is indicative of the shrinking avenues for raising additional revenue in an economy that is in turmoil.”
Commenting on the excise tax hikes, KPMG outlined that the government would be raising excise taxes on most of the taxable products to bridge the revenue gap.
The Treasury announced a consultation period on the bill and will collect evidence from stakeholders until May 4 but considering the position of Yatani, who openly stated that the previous decision to drop the tax rate to appease stakeholders should not have happened at all, any favorable changes are unlikely.
Lessons from the Past Not Learnt
In September 2019, a decision by the Kenyan government to double the 10% excise tax on sports betting to 20% was the main reason Sportpesa decided to withdraw from the country and abandon its position as a leading operator while also canceling its active sponsorships with local football clubs and downsizing its local employees.
In 2020, the country scrapped the tax completely acting on a recommendation from the Parliamentary Finance Committee which raised concerns that the higher tax rate led to operators leaving the market and resulted in lower tax revenue.
In 2021, a proposal to restore the tax rate at 20% via the 2021 Financial Bill was amended by the Finance Committee, which lowered the rate to 7.5%, following evidence from operators among which Sportpesa.