STAND-OFF

KRA demands Sh61Bn in betting tax row

Nine betting firms owe the state Sh43,545,363,681 , an amount the government has been mum on

In Summary
  • On July 10, the government directed Safaricom, Airtel and Telkom Kenya to withdraw pay bill numbers and SMS codes of the affected companies
  • The Association of Gaming Operators has accused the taxman of using a loophole in the amended Finance Act 2018 to demand tax on winnings
The KRA headquarters at the Times Towers.
The KRA headquarters at the Times Towers.
Image: FILE

The betting firms whose licences are deferred over tax owe the government more than Sh61 billion in unpaid withholding tax, latest government data shows.

This comes as the stalemate between the government and about 27 companies continues, with Kenya Revenue Authority remaining firm on its push for the taxes.

A letter by KRA to the Betting Control and Licensing Board (BCLB), seen by the Star had in June indicated that  nine of the betting firms in question owed the state Sh43,545,363,681 in withholding tax on winnings.

The taxman on Wednesday last week gave a new figure of Sh61 billion to the Senate Committee on Justice Legal Affairs and Human Rights , an amount the government has been mum on.

 

Among top companies which have locked horns with KRA include Pevans East Africa Limited which trades as SportPesa. It has the highest amount of withholding tax on winnings, with the taxman seeking to recover Sh22.2 billion from the firm.

Betin Kenya which operates under Gamcode limited owes the state Sh17.6 billion in unpaid taxes.

Shop and Deliver Limited(Betika) owes Sh2.2 billion, Gaming International(K) Limited(now Nanovas International (K) Limited) trading as BetPawa is owing Sh1.1billion while BlueJay limited(Betway) owes the taxman Sh257.6 million.

Others are Premier Bet (K) Limited (Sh100.9 million), Acumen Communications Limited (mCHEZA) Sh43.2 million, Oxygen 8 East Africa Limited(BetYu) Sh52.5 million and Mozzartbet Limited(Sh12.5 million).

Another firm on the list is Sporty Bet which KRA has not provided amounts owed.

“Withhold license until taxes are fully paid,” the domestic taxes department (Betting and Gaming Sector) has recommended in the letter Ref:BCLB TAX RETURNS VOL 1(11) addressed to the Betting Control and Licensing Board.

In a letter dated June 18, the board had sought to know the total Betting, Lotteries and Gaming (BLG) taxes by licensees for the financial year 2018/2019 and the compliance rate.

 
 

“Currently, there are no ongoing discussions or negotiations between the authority and the listed licensees. However, we note that the licencees have active cases in court where they have sued the authority over tax recovery measures that were taken to recover outstanding taxes,” KRA says in the letter.

“These licencees have failed to comply with the provisions of the law on withholding tax on winnings,” the taxman notes.

There are 72 registered betting firms in the country according to the state. According to a report tabled before the Senate Committee,  total taxes paid between July 2018 and June 2019 amount to Sh12.5 billion.

Total taxes paid last month under the current financial year amount to Sh784.3 million. Of the affected 27 companies, seven have come up with payment plans the taxman said. 

So far, Sh2.7 billion has been paid under the payment plan

''We are still engaging the remaining few with a view to agree on an acceptable payment plan and commitment to comply with the laws moving forward,'' KRA told the Committee chaired by Nandi Senator Samson Cheragei.

The government has in recent times been hard on betting firms with major concerns being addiction and tax evasion.

All betting firms were supposed to be vetted afresh and have their licences renewed by July 1.

Deputy Commissioner Elizabeth Meyo recently said the government was forced to take action after the firms refused to pay withholding tax on the winning as required by law.

The move saw the licenses of 27 bookmakers among them 13 casinos, six lotteries and eight betting firms deferred, with Interior CS Fred Matiang'i deporting 17 directors of companies involved in gambling.

On July 10, the government directed mobile money service providers; Safaricom, Airtel and Telkom Kenya to withdraw pay bill numbers and SMS codes of the affected companies, a move that has almost driven the firms out of business as punters struggle to find ways of depositing into their accounts.

“The licenses for the betting firms were not renewed until they meet the outstanding renewal requirements as well as outcome of ongoing due diligence to determine if they are fit and proper to hold a license from this board,” BCLB Acting Director Liti Wambua told the telcos in a letter.

Last week, SportPesa CEO Ronald Karauri accused KRA of acting in bad faith by asking the regulator to withhold its licence despite pending court cases.

“It is our view that the courts and the tribunal, having rightfully seized of the matters, should be allowed to resolve the issues,” Karauri told the Senate Justice and Legal Affairs Committee.

Karauri who is also the Association of Gaming Operators chairman accused the taxman of using a loophole in the amended Finance Act 2018 to demand winnings.

Senate has  lashed at state organs for disregarding the law by suspending some of the the firms' operations and deporting some of their directors despite matters pending in court.

When the debate on gambling heated up in May , the government said betting companies made more than Sh200 billion in 2018 yet they parted with only Sh4 billion in taxes.

On April 1, Matiang’i vowed to introduce tough measures to regulate betting,  blaming the gambling industry for driving the youth and families into heavy debts.