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Betting firms say tax hike will kill industry

Man betting on his mobile phone

 

Man betting on his mobile phone

Kenya’s proposal to hike taxes rate for online betting firms by nearly seven times will suffocate the fledgling industry and hurt supporting businesses including telecoms and media companies, industry executives said on Friday.

Treasury Cabinet Secretary Henry Rotich proposed last week to raise the tax rate to 50 percent of gross profits from 7.5 percent. The tax would fund sports, culture and the arts, he said.

The rapid growth of betting in a loosely regulated environment has hurt the young and vulnerable, he told lawmakers in this year’s budget speech.

He did not offer specific examples, but Kenyan media have carried stories of people who committed suicide after losing all their savings to Kenya’s roughly 20 online betting firms.

“It will kill the industry,” the chairman of the Association of Gaming Operators of Kenya, Ronald Karauri, told Reuters. Industry executives said about 7 million out of 44 million Kenyans have registered for betting services. There is no publicly available industry-wide figure for annual profits.

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Betting has expanded rapidly since 2014 thanks to mobile phone-based financial services like M-Pesa by Safaricom , which allows users to deposit bets and receive winnings on their phone without needing a bank account. Safaricom says mobile phone-based betting was driving revenue in its texts or short messaging services (SMS) business, blunting the impact of free Internet-based services such as WhatsApp.

Media companies also benefit from daily advertisements from betting firms. “Putting people who are paying tax out of business doesn’t solve the problem. You can create a black market of people taking bets all over the place,” Karauri said. 

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