• Gross Gaming Revenue equals Amount Wagered minus Winning Payouts, according to global best practice
• Gross Gaming Revenue should be taxed at 15 percent according to the KRA website
The Kenya Revenue Authority has cleared 10 betting companies whose licences were not renewed on July 1, 2019, because of questions surrounding their tax compliance.
Betway, OdiBets, Mozzartbet, Ken Bookmakers, Lucky 2u, Eazi Bet, Kick off, Eastleighbet, Palms Bet and Bet Boss received tax clearance on July 22.
However, Betin and SportPesa, the two biggest betting companies in Kenya, were conspicuously absent from the KRA list of tax clearances. They and 17 other betting companies remain in regulatory limbo pending a tax clearance from KRA.
On April 1, Interior CS Fred Matiang’i gave the Kenyan betting firms three months up to July 1 to seek fresh renewal of licenses upon proving tax compliance. They also had to show that they were sufficiently liquid and had performed well financially for the past four years.
The tax dispute appears to hinge on what constitutes the revenue of betting companies. Government has claimed that the betting companies have been earning Sh200 billion per year but this appears to be the total amount staked each year, not what is actually retained by the companies. A lot of this is recycled money where punters bet, win, and bet again. The same money is being recounted over and over. It is not actually revenue for the betting companies.
Betting Control and Licensing Board chairman Kimani Kung’u has also questioned whether non-compliance with taxes was behind the non-issuance of licenses.
In an interview with Radio Jambo in July, Kung’u said that the revenue of betting companies at the end of 2018 was between Sh20 billion and Sh25 billion and that there is no way that could have risen to Sh200 billion by mid-2019.
The KRA argues that all bets placed with betting companies should be considered revenue and therefore taxable. On the other hand, the betting companies say that their revenue is the difference between the amount placed as bets and the amount paid as winnings.
International best practice supports the argument of Kenyan betting companies. Gross Gaming Revenue equals Amount Wagered minus Winning Payouts, according to international tax consultants.
“There are two main approaches to taxing online gaming activities: a tax on stakes, levied directly on consumers when placing bets, which tends to discourage consumers from participating; and a gross profit tax (GPT) levied on operators’ winnings. Most countries are opting for the GPT option, as being more likely to boost growth in the regulated market and thereby help the tax take,” PWC writes in its analysis Global Gaming Outlook.
Curiously the KRA itself seems to agree on its website. "Betting tax is chargeable on the gross gaming revenue (GGR) of a bookmaker at the rate of 15% as provided by Section 29A of the Betting, Lotteries & Gaming Act, 1966 Cap 131. Gross gaming revenue means gross turnover less the amount paid out to the customers as winnings," it states.
None of the betting companies dispute the 15 percent tax on GGR and they are all complying. For instance, SportPesa, the only betting company to have made its financial figures public, paid the KRA Sh3.6 billion as 'betting tax' or GGR in 2018. That was half the total Sh6.3 billion paid as tax by SportPesa in 2018.
A tax on GGR of 15 to 20 percent for sports betting is typical for countries as varied as Denmark, Australia. However, Germany charges just 5 percent on GGR for sports betting (horse racing).
In 2018, KRA gave SportPesa an award as one the best taxpayers in Kenya."We want to thank and appreciate you for the role you play in the economy. It is our hope that you continue to grow," Emma Mwambia, a KRA official, said at the ceremony.
Therefore, it remains very unclear in what way Betin and SportPesa are not tax-compliant and why their licences have still been withheld.