Bettors in Kenya could soon be in for a shock. A proposed betting tax increase is on the horizon. If approved the local tax rate could jump from 7.5% to a whopping 20%. The amount would apply to lottery tickets, competitions, sports betting, and gaming. It is Treasury Cabinet Secretary Ukur Yatani that has brought the proposal, though the policy has yet to be accepted.
In more detail, the policy would require operators to deduct Sh200 out of every Sh1,000. The money would go straight to government coffers. More importantly, the deduction would apply regardless of the bet won or lost.
The tax change comes is in response to the Kenyan Finance Bill of 2022. It has been reported that Sh3.31 trillion is required from July of this year. The new betting taxation would contribute to Sh50.4 billion to that amount. A big help, especially since the government seems to be under financial pressure.
A Solution to a Problem
Mr. Yatani does not see the tax hike as a problem, but as more of a solution. He explained that gambling has become a major issue. He pointed out that the act of wagering is extremely addictive, and that the new tax would be a step toward curbing numbers.
This isn’t the first time that a 20% tax rate has been proposed. In 2019 the policy was passed, though did not stay in place for very long. At the time, Kenyan betting sites lobbied against the change and successfully had it removed in 2020. Bumping up the number now would be returning to what had already occurred in 2019.
It should also be remembered that the treasury attempted a similar move in 2021. Perhaps this will be the year that the policy is once again reinstated. According to Yatani, it is high time that something was done to combat problem gambling.
Local bettors and online gambling enthusiasts are not happy about the proposal. If passed the tax would drastically reduce how much a winning bet pays out. It has been pointed out that a theoretical winning bet of Sh10,000 would only pay Sh8,000. The other Sh2,000 would go to the government. This is in addition to corporate income tax already taken from operators.
Yatani has countered by saying that gambling falls under the sin tax category. A sin tax is an effort by the government to tax products and activities seen as harmful. The notion in itself is highly controversial. Yatani again pointed out that betting is particularly harmful to Kenya’s youth. He stressed that not only is digital money lending on the rise, but that reported suicides have also been increasing. Most tragic is that the suicides are often indebted students.
A Closer Look at Details
While suicides are up some corporations are raking in money. Safaricom has reported that income from betting is up by a large margin. Through platform M-Pesa the corporation has enjoyed a 69% increase in revenue. Income numbers are up 69% to a total of Sh83.2 billion, taking into account the 6-month period ending September. M-Pesa itself has seen an 84.7% increase in betting volume.
More telling is that the local government indicated it would be pushing to reduce gambling overall. Yet the number of operators in the country increased by 31.5%. By 2020, the total number of operators went from 76 to 100. This is according to the Betting and Licensing Control Board (BCLB.)
Apart from taxing gambling Yatani also proposed an increase in beer, whisky, gin, rum, and vodka. An increase in sugary products like white chocolate has also been put forward. It isn’t yet clear how the proposals will unfold but Kenyans will be watching closely.