Kenya’s new tax on betting highest in region, says PwC
6 months ago, 9 Jan 09:50
Consultancy firm PricewaterhouseCoopers (PwC) has revealed Kenya’s betting tax is the highest in the region and ahead of gaming hubs like the famed Las Vegas. PwC says the new 35 per cent tax on all gambling revenues is higher compared to other African countries like South Africa which charges 9.6 per cent, Rwanda (13) and Uganda (20). Neighbours Tanzania replaced corporate tax in the gaming industry with a six per cent tax on revenue as an incentive to attract more players to invest in the business. Developed nations of Germany (five per cent), Las Vegas (6.5) and Canada (20) have significantly lower rates than the Kenyan one which became effective from January 1. The United Kingdom levies 15 per cent as a conclusive tax for remote online gaming with no further levies. Companies established offshore are allowed to operate in the country. The actual figures contrast sharply with what has been reported recently in local media claiming, for example, that the rate in the UK and other European nations such as Czech Republic, Belgium, Slovakia, Spain and Denmark is 50 per cent while in Germany the tax is at an astronomical 90 per cent. Steve Okello, a Tax Partner at PwC, reckons that Kenya’s taxation is harsh on the nascent industry and could hurt the growth of related sectors and government revenues with the affected firms scaling back operations or relocating their businesses. “I feel the tax change that is probably the highest in Africa looks discriminatory, you know one industry is being picked out and heavily charged,” said Mr Okello. “We are likely to see lots of cutting back on expenditure if not closures in the industry that will affect overall tax growth,” he added. Besides the blanket 35 per cent tax on revenues, lotteries pay 30 per cent corporate tax and dedicate 25 per cent of their sales to charities as a legal requirement before taking care of winnings and other operating expenses. Betting firms say the tax hike will kill the fledgling industry and hurt supporting businesses including telecoms and media companies, which benefit from daily advertisements from the firms. Safaricom #ticker:SCOM says mobile phone-based betting was driving revenue in its SMS business. Kenya Revenue Authority (KRA) warned the tax hike will hurt tax collection from gaming firms. Pambazuka National Lottery suspended operations on Sunday following the hike. “The effect of the 35 per cent tax on all ticket sales is that the total cost of operations rises to 115 per cent and this before deduction of operations costs,” said the firm in a statement. Analysts fear local gambling firms could relocate to offshore tax havens which offer low rates to attract capital investment. “Betting is online and technology based and firms can move to low tax jurisdictions like Malta and Gibraltar and still operate from Kenya. The country will lose revenue in this event,” Mr Okello added. High taxes have seen renowned betting firms such as Bet365, Betway and Betfair — whose services are accessible to ...
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