After hearing testimony from SportPesa, which had left the market over the tax before returning when it was abolished last year, Kenya ’s Finance Committee has reduced a contentious planned tax on betting stakes from 20% to 7.5 percent. The revisions to Kenya’s 2021 Finance Bill, which were released this week, made the adjustment. Since 2019, when Kenyan legislators decided to increase the excise tax on betting bets from 10% to 20%, the levy has been a major cause of controversy.
Operators SportPesa and Betin left the market as a result of the hike, which came after a protracted battle over a different 20% tax on wins.
During last year’s Finance Bill talks, however, the Finance Committee noticed that the increased rate had resulted in lesser income due to market withdrawals, and recommended eliminating the tax altogether. President Uhuru Kenyatta eventually approved the idea and signed it into law.
However, Treasury Secretary Ukur Yatani stated only days after the bill was signed into law that the administration intended to reinstate the tax.
The government then did so in the 2021 Finance Bill, which stipulated that the excise duty on betting goods shall be 20% of the amount wagered or staked. The Finance Committee, however, modified the charge once again during its examination of the measure.
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Sportpesa, for example, contended that utilizing turnover as the basis for the excise tax was contradictory to excise duty legislation. The legislation stipulates that the excisable value of services shall be “the fee, commission, or charge payable for services, or open market value,” according to the operator.
The committee decided to maintain the turnover tax, but amended the bill to reduce the rate significantly.
“The committee observed that the proposed rate of excise duty on betting is too high and may end up not achieving the intended revenue as most players will opt for international platforms for their betting activities,” it said.
The report added that the tax applied only to betting, rather than also lotteries, creating unfair conditions in the market.
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As a result, it proposed reducing the tax to 7.5 percent while still enabling it to apply to both betting and non-charitable lotteries or prize games.
If gambling stakes were the same at both rates, this would account for 30% of the anticipated income from the higher rate, according to the committee.
Now that the law has been thoroughly reviewed by the committee, it must be voted on by the Kenyan National Assembly, which may make more amendments, before it is sent to Kenyatta for final approval.
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The charge, according to Sportpesa, pushed the company out of the market in 2019, but it has since returned under a new license owned by Milestone Games. However, the regulator, the Betting Control and Licensing Board (BCLB), originally barred the return, claiming that former owner Pevans East Africa still had the license to run the Sportpesa brand. A High Court judgment, however, enabled Sportpesa to keep accepting bets.
Kenya betting tax Kenya betting tax
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer