Oct10
New Tax Dispute Forces SportPesa to Halt Its Operations in Kenya
October 1, 2019 Aleksandra Zolotic
The largest betting operator in Kenya, SportPesa, stated it will halt its operations in the country. The company made this decision after the country’s parliament voted to increase a tax on betting stakes at 20% for the 2019-2020 fiscal year.
The Kenyan Parliament’s Finance Committee proposed a return a 20% excise tax rate on betting stakes in the 2019/20 budget on 19 September.
MPs voted the budget through on September 25, including the 20% tax. That was a significant increase from the 10% stake proposed by the treasury back in June.
Seizing Operations Until Rate Changes
In a press release, SportPesa states that it won’t operate in the country while this rate is at power.
“SportPesa is disappointed with the decision by the Kenyan legislature to impose a 20% excise tax on all betting stakes. The tax is based on a fundamental misunderstanding by the Kenyan treasury of how revenue generation works in the bookmaker industry.
Until such time that adequate taxation and non-hostile regulatory environment is returned, the SportPesa brand will halt operations in Kenya”, said the company in its statement.
The brand emphasizes its belief that authorities are misunderstanding the gambling industry. It adds that tax of this rate will result in a tax bill twice the amount of revenue generated.
“The entire betting industry saw Sh200 billion in stakes placed in 2018, but gross gambling revenues were only KES20 billion (£156.4m/$192.5m/€172.2m) from those stakes. The new tax will demand 20% of the KES200 billion figure, making the industry’s tax bill KES40 billion for this measure, double that of actual revenues.
This is in addition to the 20% paid to winning customers, 15% tax on GGR and 35% Corporation Tax. This creates an over-taxed and unfair operating environment that will drive businesses in Kenya underground. For customers, the economic incentive to place bets will be completely removed as the taxes will deprive consumers of their total winnings.
It will have severe consequences for licensed betting companies, which dutifully pay their taxes and ultimately will lead to a decline in government tax revenue to near zero and will halt all investments in sports in Kenya,” explains the operator.
High Taxes That Revenues Can’t Cover
SportPesa said that in total, a combined bill from all taxes an operator would face will amount to KES 76bn. According to the company, a new tax rate of 20% is unrealistic comparing to the revenues.
The operator also considers that this action by the Kenyan Government will drive online gambling on the black market. Something that will significantly decrease the revenues of the country, with the gaming industry being its big contributor.
Another Clashing of the Authorities and Operators
Kenyan authorities and operators have clashed several other times in recent months. In fact, president Uhuru Kenyatta called upon the country’s lawmakers to a total ban on gambling in the Kenya in August.
After a previous dispute with authorities over a different tax that also required operators to pay 20% of a bettor’s stake, the brand has been in the process of returning to operations in Kenya.
Dated back to 1 July, the dispute began when the Betting Control and Licensing Board (BCLB), declined to renew the license applications of SportPesa and 26 other brands.
The Kenyan regulator claimed that operators were required to pay the tax on not only winnings but also for betting stakes. As a result, the regulator proclaimed that operators owed KES60.56bn in unpaid taxes.
After the state ordered telecoms company, Safaricom, to block banking services to these 27 companies, leaving customers unable to deposit funds, SportPesa ended its sports sponsorships in Kenya and placed its 453 employees on the leave.
It seemed like the authorities and the brand was close to reaching an agreement earlier this month. On September 9, the operator stated that it believes its license would “be reviewed and renewed by the Betting Control and Licensing Board and SportPesa can resume normal operations in Kenya.”
However, the new tax left SportPesa to once again refuse to do business in the country until the new imposed tax rate is changed. According to the company, its closure of operations in Kenya would not impact its sponsorships outside of this country or its business operations in other markets.
Source:
“SportPesa halts Kenyan operations after new tax dispute”, igamingbusiness.com, September 30, 2019.
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Wow, that’s a high tax rate to be added to already existing ones. The Kenyan Government should except the fact that players want to play in online casinos and to do its best to create a safe environment. Not to drive them and operators to the black market, which will happen due this outrages taxes.