Kenyan Finance Bill Signed Reducing Gambling Tax from 35% to 15%

Kenyan Finance Bill Signed Reducing Gambling Tax from 35% to 15%

Kenya’s betting operators received some good news on Friday after President Uhuru Kenyatta signed into law a new finance bill reducing their tax rate on gross gambling revenue (GGR) from 35% of 15%. On the downside, however, the industry was warned that the government was also considering curbing their ability to advertise gambling products across media outlets in the country.

Industry Background

The East African country of Kenya is currently the continent’s third-largest gambling market, after Nigeria and South Africa, and during the 2016/2017 financial year generated Sh20 billion (US$198m) in tax revenue, according to the Betting Control and Licensing Board (BCLB).

The industry’s success, however, has come at a cost and over the past five years the government has introduced laws to regulate and restrict the industry in order to reign in the rampant levels of problem gambling in the country. The significant challenge facing Kenya is highlighted in a number of studies commissioned in recent times which found it had one of highest levels of problem gambling amongst young people aged between 17-35. This includes research released in 2016 by the University of Eldoret finding that a massive 78% of all university students had suffered from a gambling related problem at some time.

Tax Rate Hike and Backlash

In 2017, the National Treasury & Planning Cabinet Secretary Henry Rotich announced that the tax rate on gambling firms would be raised to 50 percent, and as he noted in his Budget Speech at the time:

“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.”

The proposed revision was soon greeted by protests from gambling companies, though, and caused a backlash within the industry. On January 1st of 2018, the Tax Laws Amendment Bill then went into effect, and in a comprise to betting firms it included an attachment to increase the tax rate on gambling operators to just 35% of GGR.

Nevertheless, the rate was still viewed as excessive and Pambazuka National Lottery (PNL), which had previously been paying a 5% tax rate, protested the decision by opting to suspend its operation. Other operators opposing the move included gaming firm SportPesa, which pulled a significant portion of the sponsorship money it had originally earmarked for the football club Gor Mahia, the Kenyan Premier League record title holder that has won five out of the past six years.

Tax Reduced to 15%

It would appear that the government has now finally caved into pressure exerted by betting firms, and as a result the tax rate imposed on gambling operators has now been reduced from 35% of GGR to 15%. Individual gamblers, on the other hand, look set to shoulder a significant proportion of the reduced tax burden and will be required to start paying a 20% tax on their winnings, with the government claiming that the split tax regime will contribute around SH30b (US$297m) each year towards government coffers.

The online betting sector will also be subject to higher taxes, with licensed operators now facing a 15% tax on online and data services, as well as a 20% tax on bank money transfers fees.

Operators Satisfied

As one might expect, gaming operators appear satisfied over the new 15% tax rate on their GGR, and SportPesa has already announced that it would be increasing its financial commitment to Gor Mahia in the near future. In fact, SportPesa CEO Ronald Karauri has stated that his company was currently in the process of making an advanced payment to the cash strapped Kenyan football club in order that it may “take care of whatever issues they have for now.”

Advertising Ban

In the meantime, the Kenyan government is considering following the examples of a number of European countries and restricting the advertising of gambling products across media outlets. The Labour Party of Great Britain, for instance, has proposed banning gambling commercials during live sporting events, while Italy has already banned all such advertising on television.

Concerned about the high rate of underage gambling in the country, the Kenya Film Classification Board, which is also a player in the advertising industry, has therefore recommended that gambling advertising be restricted between the hours of  5 a.m. and 10 p.m. If measures are taken too far, however, Kenya risks negatively hitting the competitiveness of its gambling industry and facing yet another backlash as operators look to take their businesses elsewhere.