In Summary
  • Betting companies have come out to state their disappointment in the government’s proposal to impose an excise tax on gamers’ stakes.
  • The proposal to tax stakes is not viable in any given economy and will, definitely, result in a boom in underground illegal business.
  • Despite the numerous taxes, the law still requires betting firms to pay a further 30 per cent corporation tax on their profits.

Filling the country’s gaping budget hole is certainly going to hurt. So here is a question for the National Treasury: What would hurt more, introducing punitive taxes on industries that are seen to be booming, such as betting, or reducing government spending on non-priority projects?

Economics tells us that targeted, punitive tax increases like the ones aimed at the betting industry hurt the economy immediately by reducing demand. In other words, increase taxes and Kenyans would have less money to spend.

TAXATION

In most cases, consensus has been reached and an amicable middle ground arrived at after an honest debate on the pros and cons of a taxation regime that is being put forward.

Nowhere has such high-handedness been more pronounced than in anything or any service labelled ‘sin tax’ by governments of the day.

In Kenya, the latest entrants into the ‘sin tax’ bracket are the betting firms, who often are doing clean business and following all the rules of the land set out to them by the very government but who are often hounded for what appears to be none other than the pursuit of additional tax revenue.

Betting companies have come out to state their disappointment in the government’s proposal to impose an excise tax on gamers’ stakes. A stake is the amount of money risked on the results of a game.

BOOM

In fairer tax jurisdictions, stakes are never taxed. The proposal to tax stakes is not viable in any given economy and will, definitely, result in a boom in underground illegal business.

This decision does not follow any best practice and the tax, which is the first of its kind, will be detrimental to the socioeconomic growth of the country. Constant tax increases are not an optimal and sustainable strategy for building a favourable business environment.

Therefore, stakeholders in the industry must join hands and urge the government to adopt an inclusive approach, reconsider the offensive tax and collectively craft a direction which will benefit both the government and businesses in Kenya.

A few years ago, when the Treasury proposed a 35 per cent tax on betting firms, they demonstrated how such measures would drive them out of business and the government eventually listened.

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