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Gambling craze hands KRA Sh4.7b as high tax beckons

KRA Commissioner General John Njiraini. (Photo: Fidelis Kabunyi/Standard)

The Kenya Revenue Authority (KRA) has made Sh4.7 billion in taxes from the gambling craze that has gripped the nation.

According to the taxman’s domestic data base, eight major players in the betting sector will help more than double the taxes from the sector from Sh1.2 billion in 2015/16 to Sh3.8 billion in the current financial year.

The data, tabled before Parliament’s Labour and Social Welfare Committee, showed that the eight betting firms will have cumulatively given KRA Sh4.71 billion since June 2014.

However, the figure could be much higher given that the estimate is only based on self-assessment reports from the eight firms. Revenues from casinos and bookmakers are also not captured.

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Data from the Betting Control and Licensing Board puts the number of registered and licensed casino operators at 50 and bookmakers at 25, though both have a countrywide network of branches.

Betting, lottery, and gaming taxes are collected on an agency basis. The taxman said compliance by operators in withholding and payroll taxes will require a clearer focus.

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 INCREASED COLLECTION

There is potential for KRA to collect even more money with tightened mechanisms and looming legislation. Starting January, KRA has been collecting 7.5 per cent of gambling companies’ revenue after they have paid out winnings.

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The sector could be the new kid on the block for the taxman as his target for 2017-18 financial year is set to increase to Sh1.7 trillion.

But in the proposed legislation, Parliament wants to double betting tax to 15 per cent while lottery tax will increase five times to 20 per cent. In addition, if the proposals go through, gaming tax will increase from 12 per cent to 20 per cent as that of prize competition increases to 20 per cent from 15 per cent.

All winnings could also see the re-introduction of a 20 per cent withholding tax.

However, such moves, KRA Commissioner General John Njiraini told the committee, could only boost exchequer revenues for a short time depending on how consumers react.

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“Our experience indicates that high tax rates even for commodities considered as socially undesirable ultimately lead to reduced demand. It may also help develop an underground economy and promote tax evasion,” he said.

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Appearing before the David Were-led committee, Mr Njiraini explained that it was crucial to compare the taxes with those of other countries to avoid transfer pricing by sector players.

Since firms have online platforms for betting, if tax regimes are high in Kenya, a company operating in Kenya could ride on foreign gamblers living in countries with a favourable regime, leaving KRA with subdued earnings.

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