The gaming and betting industry is currently in focus in Kenya as a result of emerging gambling habits especially amongst the young and vulnerable. Tell-tale narratives have been given demonising the industry without proper information and the positive impacts the industry creates.
The Government, in an attempt to control betting, resorted to levying a uniform tax of 35% of gross gaming income on all sectors of the industry by passing a bill through parliament, which makes other sectors within the industry suffer representing an increase of almost between 300% - 500% depending on which sector of the gaming industry.
The previous taxes prior to 1st Jan 2018 were; Lottery (5%), Sports Betting (7.5%), Casino (12%) and Price Competition (15%). Gross gaming income is basically the working capital of a company. What needs to be noted is that this tax is not based on profits. It is implemented on the gross gaming revenue before paying out any expense i.e. Salaries, Rent, Security, Electricity, suppliers and other fixed operating expenses of a company.
This in any company is not sustainable bearing in mind that this is not a protected industry. This means that there are no regulations in place to protect one operator from another in terms of territory and market share. Licenses for various sectors of gaming operations were issued without much limitation. Competition is high resulting in a high financial output by operators in terms of marketing and promotion constituting a major expense and percentage of its profits.
A past match up between Gor Mahia and AFC Leopards
What follows is the effected companies start reducing their output which will result in eventual closures and loss of jobs.
The gaming business is a unique one as opposed to other industries. In restaurants, night clubs, transport, general retailers and other sectors, any increase in cost in price of stocks and goods, transportation, taxation, rentals can be adjusted and offset by the business reevaluating
its pricing policy, its quality or quantity. The gaming business has no pricing control. What is deemed as price is termed as “Stake” in the gaming business. Increasing the stake would increase the payout (win). The gaming business is unable to reduce neither its quality nor its quantity.
False reporting on taxes imposed on the betting and gaming industry is false ending up to give a false impression and misleading of the public.
|
Country |
Reported Taxation |
Actual Taxation |
|
Germany |
90% |
5% - 20% |
|
France |
80% |
1.8% - 25% |
|
S. Africa |
9.6% |
|
|
Rwanda |
13% |
|
|
Tanzania |
6% |
The effect of the new amended taxation has a number of negative outcomes that all the key stakeholders need to come together and offer amicable resolution. With the new 35% increase, illegal gaming is bound to mushroom forcing operators close shop and move off-shore. With this, the government ends up losing gaming tax revenue.
As there was no proper consultation with the industry and experts, investors planning to set up their businesses in whatsoever sector will scare away easily. The investors would be wary of such a government that can decimate a whole industry overnight. They would feel that a business would be punished for being successful.
Further dialogue between the Government, Legislation, Regulators and stakeholders is key in maintaining the over 10,000 jobs created and look at ways in which more jobs can be created.