Kenya’s Government has been mulling the idea of gambling tax reduction for several weeks now, but as it has been officially confirmed recently, the new Finance Bill 2018 has been inked and vital reductions are set to take place. The proposed tax cut would bring a breath of fresh air to the field as it reduces the existing 35-percent tax to only 15-percent, making the overall environment of the field much more beneficial for both operators and the authorities. However, concerns have still been voiced.
Ever since the beginning of September state lawmakers have been considering significant changes to what the field has been notorious for – the high taxes applied on gambling throughout the country. This has been an issue pointed out on multiple occasions in the past and by many operators experiencing the negative impact of high taxes.
Game-changing New Finance Bil Receives OK
This week would go down in history as a memorable one, since Kenyan President Uhuru Kenyatta officially placed his signature on the long-anticipated Finance Bill 2018 which aims to bring improvement to many fields of the country, including the gambling one. Thursday was the day which witnessed the session of the Parliament.
Up to this point, the taxes regulating the field amounted to some 35 percent of the gross gaming revenue of betting operators developing in the field. The proposed reduction aimed to impose a 15-percent tax to the field instead and thus improve their overall performance. In addition to this reduction, there would also be a new 20-percent tax introduced on the amount won by bettors participating in gaming activities in Kenya.
Previously stated projections claim that this reduction would not have a negative impact on the economy, as it would still be able to rake up some SH30 billion (approximately US$297 million). In the weeks leading to the official passing of the new Finance Bill concerns have been expressed by individuals, most recently by a member of the House.
They stated that the tax cut would be damaging to sports teams relying on the boost provided by government funding. What should be taken into account is that a certain amount of the gaming tax revenue generated by betting parlors across the country as well as betting operators is being collected.
So the president want Kenya to be gambling nation. pic.twitter.com/CkPytVh4mq
— John James (@johnyyjames) September 19, 2018
Previous Attempts at Improving the Field
This summer witnessed several attempts of reducing the tax, the first one in June as part of the proposed Tax Laws Amendment Bill 2018. Following its scrapping, several weeks later there was a second attempt made by the Kenyan President backing up the Finance and National Planning Committee. The only proposal which saw success at the end was the one greenlighted last Thursday. Now the field is trying to estimate the influence such a reduction could have on operators.
It could be recalled that last summer brought the major changes to the field with the enactment of the Finance Bill 2017, which was turned into law on 21st June. Under the piece of legislation, a 35% tax on gross profits generated by gambling activities was imposed. Before the Finance Bill 2017 was signed, a 5% tax was set at local lotteries. Bookmakers were taxed at 7.5%, while casinos were made to pay a 12% on their gross gambling profits.
Back then gambling company SportPesa opted for the withdrawal of its sponsorship from some of Kenya’s football teams. In addition to that, this January saw Kenya’s Pambazuka National Lottery suspend its operation specified that the reason for the halt is the high rates of the tax on all ticket sales which makes it impossible for the business to continue operation in the foreseeable future.
The reduced taxed coming with the new bill have the potential to positively influence companies and encourage new ones to join the field.
Mobile Money Transfers Worries
What is even more concerning is that according to the Finance Bill, mobile telephony is going to also witness an increase of excise duty on mobile phone transactions, surging from 10 percent to 20 percent. In the meantime, bank transactions would also witness an excise duty jump from 12 percent to 20.
Since many operations in the field utilize mobile money transfers this could prove to be a controversial move in the long run. Smaller businesses that utilize said technology are projected to feel the impact to the highest extent.
Experts in the field have expressed their opinion that it would have been more appropriate to boost the excise duty on betting while cutting the one on mobile telephony, internet data, and money transfers. Mobile betting is widely popular across the field and transactions are usually utilized by players.