KRA eyes cash made from offshore betting platforms

The taxman is eyeing millions of shillings in revenue lost through offshore betting sites even as gambling operators peg their hopes on the recent scrapping of a controversial tax to make a comeback.

A number of gamblers had switched to internationally licensed sites that pay no taxes to Kenya to get more earnings after the government introduced a 20 per cent excise duty.

According to the measure introduced by the Kenya Revenue Authority last year, betting firms had greater responsibility for payment of tax based on the gross amount of payout to punters, including staked amount. The move upended the country’s betting market.

UNATTRACTIVE

The taxman was hoping to collect a total of Sh61 billion from an industry whose annual gross turnover was estimated at Sh2.1 billion, according to a 2016 PriceWaterhouseCoopers (PWC) report. The tax made the business unattractive for most operators, a move that forced the Betting Control and Licensing Board (BCLB) to suspend the permits of Kenyan-based bookmakers.

Betway Country Director Leon Kiptum said the move will increase total winnings: “That said, it is a good thing the burden on the punters has been reduced and operators licensed in Kenya have become more attractive, compared to offshore unlicensed operators.”

“However, with the Covid-19 pandemic, it is a wait-and-see situation bearing in mind that most people have reduced their disposable incomes and won’t have much left to dedicate to personal entertainment,” he added.

Immediate former BCLB chairman Antony Kimani Kung’u said there is a need for a serious rethink on betting sector taxation and a review of relevant legislation to include a determined revenue generation approach.

“We have to understand that this is neither a product nor a service industry. It’s a sporting industry in which winnings determine payout. Much of what is held by the industry players are individual investments of players or punters.

BANK SAVINGS

“No one would consider bank savings as the lenders’ overall turnover. Profits are calculated based on income and not investments or savings of account holders,” Mr Kung’u said.

He added that much of what is held by the stakeholders are individual investments of various players from which a legally acceptable percentage is retained.

At the same time, he pointed out, much of what is held in stakeholders’ accounts are investments for payouts to winners, “considering that taxation of investments is illegal and contravenes business principles”.

The paralysis of the lucrative betting sector also hit telecoms giant Safaricom as it lost Sh1.9 billion in revenues in the year ending March after the government banned sports betting last year.

The loss represented a 32.8 per cent drop compared to the previous year.

The removal of the tax came after a firm known as Shade.co.ke petitioned the Finance and National Planning Committee on the basis that the tax had weakened many betting firms, forcing them to cut down on sponsorships to local sports clubs such as Gor Mahia and AFC Leopards. In addition, hundreds of Kenyans had lost their jobs.

It wanted the turnover tax reduced to 15 per cent but MPs resolved to withdraw it altogether.