Kenya committee approves gambling tax cut
Amendment bill now passes to National Assembly for final vote
Kenya’s Finance and National Planning Committee has approved measures to cut the tax rate on GGR from 35% to 15%, in a major win for local operators.
The new measures also halve the current 20% tax rate on gambling winnings payable by both residents and non-residents alike.
The committee passed proposals contained in the Tax Laws (Amendment) Bill 2018, following calls from the Kenyan Treasury to do so and overruled calls from the Labour and Social Welfare Committee, who opposed the changes and called for the tax rate to remain at 20%.
Yahaya Maikori, partner in Nigerian law firm , Law Allianz believes that Kenya’s parliament “will follow through with the tax cuts, because they have seen that the industry is subject to the laws of elasticity and have also seen the negative effect that the 35% tax rate has had on gambling and tax revenues, that is aside from the uproar it generated globally.
“However, in my opinion the proposed cuts will not be implemented immediately because of bureaucracy. In addition to this, we have seen recently that Kenya is no longer the flavour of the month with gambling operators, with many beginning to focus their investments in other more tax friendly markets to increase their bottom line.”
Taxation of gambling related activities has been a contentious issue over the past two years in Kenya, with existing taxation rates of 7.5% on sports betting and 12% on online gaming.
Kenya’s politicians initially toyed with a 50% tax rate as a way of protecting minors from problem gambling, before agreeing a compromise tax rate of 35% in June 2017.
However, the current 35% tax rate which has been in force since the turn of the year, has drawn condemnation from operators and gamblers alike, who called it overly punitive.
One of Kenya’s biggest operators, SportPesa challenged the tax rise in the Kenyan courts, claiming it breached Kenya’s constitution, but a subsequent dismissal of the case led to the operator withdrawing all its sponsorship from Kenya’s sporting teams and leagues.
The bill will now be passed to a full vote in the 349-seat National Assembly before being signed into law.