Kenya’s SportPesa is once again pulling out of major sponsorships and fires warning shots against the government’s regulator seeking to claim millions in back tax. Which one will work this time, the carrot or the stick?
Kenya’s SportPesa Argues against Back Taxes Again
Kenya’s flagship sports betting operator, SportPesa, has got into hot water with the country’s tax authorities for the nth time in so many years. As a result, the operator had to drop local partnerships for the second time in its living history, caving in to pressure from the tax man.
On Friday, August 9, SportPesa issued an official statement that it was “canceling local sports sponsorships,” having already notified the Kenya Premier League as well as participants FC Gor Mahia and AFC Leopards.
SportPesa explained its decision to withdraw from backing sports events as a leverage, talking about “the uncertainty of the situation”. The government accuses SportPesa of having failed to pay hundreds of millions of dollars in tax money and is now considering revoking the company’s license and/or halting all payment processors that allow the company to accept deposits and allow customers to withdraw funds.
SportPesa and 1xBet Are Both on the Line
SportPesa is not the only company in hot water with the Kenyan authorities. Similarly, 1xBet and Betin were also summoned in Nairobi High Court to try and challenge the government’s suspension order. In their defense, the operators argued that the court had ruled against the government’s decision dated July 1, when the Kenya Revenue Authority (KRA) revoked 27 betting licenses over as much as $586 million in unpaid tax.
Details are yet to be thrashed out. The government has claimed repeatedly that SportPesa has been failing to collect the mandatory 20% tax on bettor winnings whereas the operator fought back by arguing that the process had been delayed due to court proceedings.
One of the fights that have been going in the background is whether gambling proceedings – by gamblers – are taxable income. According to the Nairobi High Court, they are.
At Daggers Drawn
Even though SportPesa CEO Ronald Karauri previously said that the operator would not consider suspending active partnerships, but in light of recent events, Mr. Karauri’s position has changed, citing fears that government’s been putting too much pressure on business, making SportPesa reconsider its previous plans.
Meanwhile, SportPesa is trying to expand into other markets, an ability that might be restricted should its mainstay market in Kenya come to cost it a pretty penny instead. The official announcement on Friday stressed the urgency of the situation while remaining hopeful that an “amicable” resolution would be found.
The current situation is not exactly news for SportPesa, who has been allegedly linked to Bulgarian mafiosi. In 2018, Kenya again sought to restrict much of the operations of the operator due to unpaid tax, which prompted the company to again start pulling out of its sponsorship deals.