Unexpectedly, the tax imposed on sports betting income in Kenya has been removed following an approval given to the Finance Bill 2020 by the National Assembly.
Previously, the tax on sports betting turnover was part of Kenya’s 2019/20 budget and everyone was almost certain that it would be applied to the budget for the upcoming fiscal year starting on July 1st, too. However, an amendment was brought in the National Assembly’s Finance and National Planning Committee, suggesting that the tax should be removed from next year’s budget. A proposal for the authorities to reduce the 20% tax applicable to player winnings to 10% failed to make progress, though.
The 20% excise tax on stakes, which was set to be adopted in the country’s annual budget, fuelled some controversy that was blamed by SportPesa for its decision to leave the local gambling sector. At the time when the company decided to get out of the Kenyan sports betting market, some community members and advocates have shared their concerns regarding the indirect effect that it would have on local sports clubs’ sponsorship contributions, as the tax had an inverse effect on the operators’ ability to financially support sports clubs.
Some Committee members once again took into consideration the effect of the tax and realized that its high level was the one that forced Kenyan customers to turn to overseas sports betting companies that were making absolutely no contributions to the country, as they were not subjected to any of the Government’s taxes. According to the Committee members, the removal of the excessive tax would have a positive effect on the country’s gambling sector, which reacted by shutting some of the retail betting shops – a move that led to layoffs across the industry.
The New 1.5% Tax on Digital Services Was Not Successful
The thing that the Committee relied on was the fact that the 20% tax was not found to be affecting betting operators and their winnings in a negative way.
Another attempt for a change was also unsuccessful – the one aimed at making the Kenyan betting sector exempt from the new 1.5% tax imposed on digital services, which was focused on making the companies based outside the country but still generating revenue from Kenyan customers pay some money to the Government. The proposed change, however, failed to get an approval, as the Committee found that the new tax would be offset against other taxes.
At the time when the debate on the matter took place in the National Assembly, the Chairman of the Finance and National Planning Committee, Joseph Kirui Limo, confirmed that the reduction in taxation is expected to boost revenue and bring changes in the downward trend at the moment, as gambling revenue was declining.