Kenyan Gambling Tax Hike Leads to Sports Sponsorship Turmoil

Kenya’s government seems to be learning a tough lesson in setting reasonable tax rates for businesses after the country’s leading betting firm withdrew all sponsorship from a number of sports teams in the country in response to a massive gambling tax rate hike from 7.5% to 35%.

A tax rate increase on the industry was originally proposed back in June, with many MPs at the time calling out for it to be set at 50%. After gambling companies voiced their opposition to the move, many members of Parliament pointed out that Kenya would still have a lower tax rate than many other countries such as Denmark, Austria, and Germany. One of the politicians was MP Irungu Kang’ata, who explaining his point of view on the issue, stated:

“It is within the range of other ‘sin taxes’ like cigarettes and alcohol. In fact, gambling is not an economic activity that adds value to society.”

In the meantime, SportsPesa opposed and challenged the move every step of the way in court. Following the high court’s recent decision to support the increase, SportPesa CEO Ronald Karauri subsequently announced his decision to pull the company’s financial support for Kenya’s sports teams, stating that he was left with no other choice. Amongst the teams that will now be affected by the decision are soccer clubs Gor Mahia and AFC Leopards, with the latter saying that it would not be able to pay salaries or honor its continental engagements due to a lack of funding. As a result, the team’s Chairman, Dan Mule, has pleaded with the government to delay its decision and reopen dialogue with SportPesa and other gambling companies operating in the country.

In the absence of a positive outcome, however, Gor Mahia said that his club would have to resort to selling branded bread and having a Paybill number placed on the players’ shirts in order to make ends meet. Things do not seem too hopeful right now, though, with some MPs accusing SportPesa of using underhand tactics. As MP Hillary Kosgey was keen to point out:

“They get money from Kenyans and it is only fair that the profits they make go into serving Kenyans in economic development. We will not allow [SportPesa] to blackmail the government.”