Posted on: April 25, 2022, 05:59h.
Last updated on: April 25, 2022, 04:51h.
Kenya is considering changes to the taxes the gambling industry must pay. The country could bring back the same controversial tax rate that virtually shut down the industry three years ago.
In 2019, SportPesa pulled its online sportsbook out of Kenya. The African country had just increased the tax rate from 10% to 20%, and remaining in the industry didn’t make financial sense for SportPesa. Other operators followed, and Kenya soon realized that the increase was a mistake. Its attempt to capture additional revenue failed completely as the gaming industry shrunk.
As a result, Kenya backtracked and reversed its decision in 2020. The country’s legislators and financial figureheads went back and forth for more than 12 months before lawmakers forced a new 7.5% rate.
Despite the rapid decline in state revenue from gaming taxes after the 20% rate, Kenya’s financial leaders apparently haven’t learned from their mistakes. The Kenya Treasury brings back the higher rate in its new 2022 Finance Bill.
New Tax, Same Old Story
The new 20% tax applies to all forms of gambling – sports betting, lotteries, gambling, and more. There is also a provision for a 15% tax on gambling advertisements. The goal is to offset losses incurred through inflation. However, Kenya’s history proves that the opposite occurs.
Kenya’s Treasury Secretary, Ukur Yatani, wants the new tax. He fought the government in each round since first trying to increase the rate to 20% years ago. Each year, he puts in the 20% rate, and each year, the Finance Committee shuts it down.
The new Finance Bill made its first appearance last week and is now on its way to the Departmental Committee on Finance and National Planning. If history repeats itself, the measure won’t get very far.
More Changes Coming
Kenya potentially has one of the largest gaming markets in Africa, but only if it can provide some stability. The Nairobi County Assembly is currently considering changes to the Nairobi City County Betting Lotteries, Gaming Amendment Bill (2021), which won’t help.
The Assembly could limit who can gamble and when. Under the bill, only five-star properties would be able to offer gambling. The bill would also limit gambling and betting establishments operating in the City from 8 PM to 6 AM.
The Tourism Regulatory Authority is the only one that can give a five-star rating, and the Nairobi City Hall wouldn’t issue operating licenses to gambling premises that don’t qualify. The goal of the law, which still needs approval, is to prevent youth from gambling.
In addition, gaming companies would have to use cashless betting throughout the region. The Act requires that the premises be cashless within six months. It also bans audio or video programming that encourages gambling, lotteries, and gaming ads before watershed hours.
Implementing the changes would force a reduction in activity, leading to a decrease in revenue for the industry. It also means a decrease in tax revenue.
In light of the confusion and controversy, Ronald Karauri, SportPesa’s CEO, wants to make a difference. The son of a former politician, Karauri is now vying for a seat in Kenya’s parliament.
Kenya’s general election is in August. When it comes, Karauri hopes to be a representative of Kasarani in Nairobi.