Betting firms lose case challenging tax raise

Hopes of blocking implementation of tax rate recommended by President Uhuru Kenyatta on betting, lotteries and gaming activities dwindled Thursday after the High Court dismissed a suit challenging it.

Justice John Mativo ruled that Pevans East Africa limited which owns Sports Pesa and Bradley/Pambazuka National lottery, who had challenged the said law, failed to disclose to the court that there was a pending case on the same issue.

“The multiplicity of actions on the same matter between the same parties even where there exists a right to bring the action is regarded as an abuse,” said Justice Mativo.

LITIGATION

Even though the two firms filed their cases separately before they were later consolidated into one, the judge pointed out that the suits simply from the same set of facts and circumstances hence sought similar reliefs.

“Even where a party brings a case to the court and is aware of the existence of similar or previous litigation, the party has a duty to bring such information to the court so as to help it avoid rendering conflicting decisions on the same subject,” said Justice Mativo.

The firms had sued the Betting and Control Licensing Board, Interior and Finance Cabinet secretaries, Kenya Revenue Authority’s Commissioner General, the National Assembly, Speaker of the Senate as well as the Attorney General.

The National Sports Fund was listed as an interested party in the case.

BETTING

In June, President Kenyatta recommended that betting, lotteries and gaming activities should be taxed at the rate of 35 per cent.

The President had made the recommendation in a memorandum to the Speaker of the National Assembly when he declined to sign the Finance bill 2017 into law, which was meant to amend rules relating to various taxes and duties.

The law raises the tax rate on gambling but sets it at a lower rate than had originally been proposed.

Lotteries are taxed at five per cent, betting firms at 7.5 per cent, Casino gambling at 12 per cent while competitions like raffles at 15 per cent. The new tax rate is set to come into force in January 2018.

According to the President, he rejected to sign the bill in to law considering the amendments made to it saying that youths need to be discouraged from directing their focus on betting, lottery and gaming activities instead of productive economic engagements.

TAX

In the case, the firms had argued that the President’s recommendation was arbitrarily and irrationally imposed as it ignored public participation.

They also accused the President of exceeding his mandate as well as usurped his powers by imposing an alleged unsustainable tax burden on the industry players.

They further faulted Parliament of considering the President’s recommendations and executed the deleting of sections 29A, 44A, 55A and 59B and re-submitting it to be assented into law.

They described Parliament as a tool for merely implementing the President’s will yet the proposed tax is excessive, unfair, unreasonable, unjustified hence unlawful.

But the AG claimed that acts of Parliament are considered constitutional until proven otherwise while the said House said it acted within its discretion as the National Assembly.

BURDENS

And the judge ruled that the National Assembly correctly processed the bill and that it was not necessary for the Senate to be included.

He also said there was reasonable public participation, that the President acted in conformity with the provisions of the law and that there no proof to show that the tax levied is not for a public purpose.

“Taxation is neither a penalty imposed on the taxpayer nor a liability which is assumed by a contract, it is but a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits hence must bear its burdens,” Justice Mativo ruled.

He added: “since no citizen enjoys immunity from that burden, its imposition does not necessarily infringe on the citizen’s rights unless it is demonstrated to be out rightly arbitrary and unconstitutional.”