Parliament has bowed to pressure from the gambling sector to cut the 35 per cent tax on betting and gaming services to 15 per cent.
A report on the consideration of the Finance Bill, 2018 shows that the decision was made to preserve the economic and social contributions of the sector to the people.
“Section 29A of the Betting, Lotteries and Gaming Act is ammended in subsection 1 by deleting the expression thirty five and substituting therefor the expression fifteen” committee on Finance and National planning said in the report
The 35 per cent tax has been in operation since January 1, after President Uhuru signed it into law in June 2017.
Uhuru approved the law after declining to assent to a proposal by the law makers to retain taxation at 15 per cent in the Finance Bill 2017.
According to the Association of Gaming Operators of Kenya the 15 per cent tax if effected will ensure that the Kenyan gaming industry survives.
The operators argued that betting firms enjoy a gross margin of 7 per cent and a further 35 per cent tax will reduce the gross profit to 4.5 per cent.
Over and above the betting tax, the firms also pay a corporation tax of 30 per cent and dedicate 25 per cent of their sales to social causes like sports sponsorship as a legal requirement.
The new proposals by the Mps has also cut the share of sales meant for social causes and charity from 25 per cent of sales to at least five per cent.
The operators have been pushing for the return of the previous tax limits of between five and 15 per cent across the gaming sectors, or a reasonable tax bracket, but not 35 per cent across all sectors.
Before the introduction of the new tax limit, lottery was taxed five per cent, sports betting paid 7.5 per cent, casinos paid 12 per cent while price competition was taxed at 15 per cent.
While calling for a reduction of the tax, the Boxing Association of Kenya noted that betting companies reduce their support to sporting activities when taxes are raised.
After the 35 per cent tax became effective in January, Betting firm SportPesa canceled all local sports sponsorship.
The company had been the official shirt sponsor for top clubs including Gor Mahia, AFC Leopards and Nakuru All Stars.The deal with Gor Mahia was for five years at more than Sh200 million while AFC Leopards' was Sh45 million annually for five years.
SportPesa also sponsored the Kenyan Premier League, which has 18-teams, and Football Kenya Federation. The Kenya Boxing League and rugby teams were also affected by the firms move. KPL got a deal worth Sh450 million and Kenya Rugby Union more than Sh600 million over a period of five years.
In January this year, AGOK threatened that betting firms will close shop and relocate to neigbouring countries if the tax is not reviewed.They said that over 10,000 jobs are at stake should the firms close shop and government stands to lose revenue.
However, they expressed their readiness to review decisions regarding their withdrawing of sponsorship for sporting activities if the government agrees to lower the tax limits.