Betting firms comply with 20 percent withholding tax
Betting firms that survived the Interior Ministry’s purge on tax non-compliance have moved to fast-track adherence to with-holding tax rules in the face of a near-certain regulator backlash.
The firms which include Odibets, Bet Lion and Betika have since implemented new laws on the withholding of customer winnings at the rate of 20 percent, to abide by the Kenya Revenue Authority (KRA) tax requirements.
“Our clients will now get 80 per cent of their potential winnings,” said OdiBets Country marketing manager Aggrey Sayi.
The firm will ensure that the tax required by the government from winners is deducted immediately a bet is complete.
This is even as the betting industry comes to terms with last week’s landmark ruling that cleared doubts on the constitutionality of taxes on income made from betting.
17 of the suspended betting firms lost their battle with KRA on Thursday as the High Court in Nanyuki ruled in line with the tax-man own interpretation on withholding tax.
The ruling followed a petition by tax payer Lesaloi Selelo in October 2018 which challenged the constitutionality of the charge on winnings in a suit which later enjoined three of Kenya’s largest betting firms – Sportpesa, Betin and Betway.
The litigation which had at the time subsequently followed the enactment of the 2018 Finance Bill into law has since defined the showdown pitting the majority of betting firms against both KRA and the Ministry of Interior.
KRA has been demanding an estimated Ksh.61 billion from the firms in withholding tax arrears having held firm to its self-definition of taxation on winnings.
“Winnings include money won, spoils, profits, or proceeds of any kind that refer to the amount or payment of winnings,” reads KRA’s own account on winnings.
“The effect of this new definition is that Withholding Tax (WHT) will now be imposed on the gross winnings payable by all sectors governed by the Betting, Lotteries and Gaming Act, that is: Betting, Lotteries, Gaming and Prize Competition”
Surviving betting firms have since disclosed the new taxation regime to clients upon their admission of stakes on games.
The gamblers who lament the tough charges on winnings could soon see the addition of a 10 percent duty on amounts staked in the next 90 days should Parliament accept the new tax proposals by the National Treasury which seeks to sieve out the ‘sin’ exercise.
“Betting has become widespread in our society and its expansion has had negative social effects, particularly to the young and vulnerable members of our society. In order to curtail the negative effects arising from betting activities, I propose to introduce excise duty on betting activities at the rate of ten percent of the amount staked,” read part of the tax proposals in the 2019 budget statement.
The proposal would see amounts staked incur an initial 10 percent excise cut, while winnings made from the remaining sum would attract a further 20 percent levy, taking the net taxable rate to 30 percent.
Effectively, Ksh.1,200 in possible returns from a Ksh.100 stake by a gambler would have seen Ksh.10 taken off the betting stake, while a bettor’s net payout would see a further slash of Ksh.240 to Ksh.960.
The Betting, Control and Licensing Board (BCLB) alongside its parent Interior Ministry and KRA has been hot on the heels of betting firms highlighting on the companies responsibility on missed revenue targets by government.
KRA for instance blamed betting firms for the estimated Ksh.14.7 billion windfall in forecast Ksh.62.9 billion in revenues from tax policies in what culminated to an 11 percent revenue performance gap across the 2018/19 fiscal year.
Unbound by new taxes, gamblers who spoke to Citizen Digital have hinted at the on-boarding of more games in bet transactions to absorb the duty additions in a factor which in effect elevates the risks for losses from the betting activities.