Kenya’s economy could take a massive knock if pleas by betting companies to review the newly-proposed gaming tax fall on deaf ears even as moral concerns emerge over the societal impact of the firms’ activities.
Such appeals have been made repeatedly over recent months to the National Treasury and Parliament during meetings which had been convened to understand both positive and negative effects of betting, gaming and lottery activities in the country.
The industry, which contributed about Sh4.7 billion over the last three years to Kenya Revenue Authority (KRA), is now facing prospects of leaving tens of hundreds in the cold, cut contribution to the exchequer and roll back on sports sponsorship deals.
Online betting is today an income-generating activity for many Kenyans and a full-time career for some, while betting companies like Sportpesa and Betway have greatly impacted lives through Corporate Social Responsibility activities and payouts to winners.
Betting companies have threatened to exit the Kenyan market following approval of the Finance Bill 2017 last month, which introduced a 35 per cent gaming tax on the firms revenues (not winnings) and a further 30 per cent as corporation tax, including other additional statutory taxes such as withholding tax and Pay As You Earn.
Previously, the firms were paying a 7.5 per cent betting tax and statutory taxes. Amid the debate on the contribution of these firms to the economy, multiple studies point to the fact that betting and gambling pose addiction especially to the youth including depression and constant anxiety upon losing a bet.
It is also arguable whether gambling is a wealth creation activity. And while many have benefitted from it, others believe making a bet should not be admired as an economic activity.
The firms suffered a major setback last month after President Uhuru Kenyatta rejected the Finance Bill 2017 and recommended that betting, lotteries and gaming activities be instead taxed at the rate of 35 per cent.
In a memorandum to the Speaker of the National Assembly Justin Muturi, Uhuru said he rejected to assent to the Bill, which was meant to amend the laws relating to various taxes and duties, because Parliament deleted the clause designed to discourage Kenyans, and especially the youth, in directing their focus on betting, lottery and gaming activities instead of productive economic engagement, a vice, according to the memo “is likely to degenerate into a social disaster”.
Members of Parliament drawn from Finance, Trade and Planning Committee had in May eschewed the proposal by National Treasury to raise taxes on betting, lottery, gaming and prize competition to 50 per cent, but the legislators recommended rates of 7.5 per cent, five per cent, 12 per cent and 15 per cent respectively.
The 50 per cent proposal according to Treasury was meant to develop the country’s sports and arts, according to the 2017/2018 Budget Statement. “Betting and gaming have become widespread in our society in an environment that is inadequately regulated.
Its expansion is beginning to have negative social effects in particular on the youth and the vulnerable members of the society,” Treasury Cabinet Secretary Henry Rotich said during the Budget Speech at Parliament in March this year.