Why the 50% tax on betting is dangerous

Finance CS Henry Rotich leaves treasury building for parliament with the briefcase containing the 2017/2018 draft budget policy statement, March 30, 2017. /JACK OWUOR
Finance CS Henry Rotich leaves treasury building for parliament with the briefcase containing the 2017/2018 draft budget policy statement, March 30, 2017. /JACK OWUOR

The playing ground for Kenyan betting companies is set to become difficult and perhaps untenable. The recently proposed national budget has stated that these companies need to pay much

more.

In the proposed budget, the taxation to be imposed on these firms is a suggested increase of close to 600%. Treasury CS Henry Rotich plans to impose a 50%

tax on the gross revenue of betting companies.

It doesn't take a genius to notice that this is an unsustainable proposal.

This will be detrimental in multiple dimensions and proportions. The following scenarios are likely to happen:

  1. Betting companies may relocate elsewhere

    According to a 2013 BBC estimate, the global betting industry was worth between $700bn and $1tn a year. With other countries being less hostile in terms of taxation like in Kenya, betting companies are likely to close shop and relocate to other countries.

    This means that Kenyan punters will no longer enjoy rewards courtesy of their preferred teams

  2. Reduced amount of tax collected by the government

    A recent KRA report indicates that betting brought in over 4 billion shillings for the year 2016. If Kenyan betting companies are overtaxed, they may cease operations and that means collective loss of crucial income streams for the government.

    Instead of this rather discouraging move, the Kenyan government should support the companies for they have major CSR initiatives.

    Kenyan punters will also opt to use alternative betting platforms and this includes online betting firms that are not be subject to local tax laws. As mentioned before, they'll do it simply because the rewards will be higher.

  3. Sponsorship

    will suffer

    Considering the fact that the government hasn’t done much to support sports in Kenya, if betting companies are heavily taxed, they will reduce their spend on sponsorship or abandon them all together.

    This means that football (FKF, KPL), basketball (BAK), rugby (KRU), motorsports (KMF), boxing and kabaddi teams and leagues, which receive millions of shillings in towards improvement and sustenance of the sport will languish in problems.

    With the entrance of betting firms, players and participants in these leagues have been receiving timely allowances and support. They can focus on playing better and the quality of the game has remarkably improved.

    Clubs have also had quality players from outside the country register their interest to get more involved in the local leagues.

    Remember when players used to go hungry? Those days are gone.

How about the corruption in the Sports and Culture ministry?

Just recently, the Sports and Culture Cabinet Secretary Dr. Hassan Wario came under fire for his comments which a lot of Kenyans have termed as “reckless and irresponsible”.

He’s on record for daring the betting firms to withdraw their direct sponsorship and has suggested that they channel their money through his ministry so that they can be offered a “taxation waiver” as an incentive.

Sports CS Hassan Wario at a past press conference. /ENOS TECHE

He further stated that the government would sponsor all local leagues that go through the ministry of sports.

Now, Kenyans know that there is a tendency to corruption and mismanagement within government, citing the

.

This scandal led to the CS being summoned by Members of Parliament and earned him a recommendation to be prosecuted by the DPP.

READ:

Basically, 88 million shillings meant to cater for the teams playing in Rio was embezzled by top officials in the ministry.

Kenyan Premier League CEO Ambrose Rachier has urged the government to rethink the proposal tabled during the budget reading because that increase in tax could have devastating effects on the industry.

“It is true that betting companies have grown exponentially in the last three years, but they have also helped many clubs financially.

The local league is sponsored by a betting company and so are four other premier league clubs.”

Over-taxing the betting industry will surely kill the betting industry yet these betting companies have and continue to do a lot for local sports.

This is why the 50% tax on betting is dangerous.