• Betting company revenue is Sh50 billion annually, not Sh204 billion.
• Betting companies companies pay back 75 percent of bets as winnings.
The Treasury is likely to lose over Sh15 billion in tax revenue annually if the government persists with its effective closure of Kenyan betting companies.
On Wednesday, the Betting Control and Licencing Board sent a letter to the telecoms companies instructing them to shut down the paybill numbers and short codes for 27 betting companies in Kenya.
The government has been wrangling with the betting companies this year over how much tax they should pay. Presently they pay 15 per cent on Gross Gaming Revenue plus various other taxes. The betting companies were unhappy with proposals in June Budget to tax 10 per cent from every bet placed by Kenyans whether they won or lost. The betting companies have gone to court to get a stay of execution on being closed down.
Government seems to have lost patience and resorted to bureaucratic means to close down the betting companies by claiming they had not yet shown they were tax-compliant.
The decision by the BCLB to withhold betting licences from 27 companies seems to be partly based on a misconception. An internal BCLB report claims that the betting companies cumulatively had Sh204 billion in revenue last year but paid only Sh4 billion in taxes.
However, the Sh200 billion is the total amount placed in bets in 2018 of which at least 75 per cent is returned to punters as winnings. That money did not stay with the betting companies. The balance is classified as Gross Gaming Revenue (GGR). Betting companies have to pay 15 per cent of GGR to government as betting tax along with other additional taxes.
According to court documents, SportPesa, the biggest betting company in Kenya, had Sh20.1 billion in GGR in 2018 and paid the government a total of Sh6.3 billion in tax. Of this Sh3.6 billion was in betting tax, Sh400 million withholding tax on winnings, Sh1.1 billion in corporation tax and Sh270 million in PAYE.
SportPesa has roughly 40 per cent market share in Kenya so it is likely that betting companies earned in total Sh50 billion in revenue and paid Sh15 billion in taxes.
Even if the betting companies are closed down, betting is likely to continue. Three of the top 10 websites visited by Kenyans are Betin, Betpawa and SportPesa. The next highest Kenyan website is online shopping portal Jumia at 13th and then the Nation at 19th.
Kenyans will easily be able to continue betting on the Premier League and other international sporting events since M-Pesa is now integrated into international payment platforms like PayPal. The end result might then be that tax revenue from Kenyan betting just goes to the foreign jurisdictions that host these betting websites.