KRA Eyes Betting Billions With 20% Stake Tax

A State-backed proposal to introduce a 20% stake tax on gambling is among amendments proposed to the Excise Duty Act through the Finance Bill 2022.

If Members of Parliament approve it, the excise duty excise duty on cash wagered on betting, gaming, prize competition and buying a lottery ticket would rise from the current 7.5% to 20%.

For every Ksh100 you place as a stake, firms would be required to set aside Ksh20 as excise duty.

The 20% tax was initially introduced in 2019, but betting firms successfully lobbied to have it removed through changes to the Finance Act 2020. Betting has in the past decade become a multi-billion dollar industry in Kenya – with sports betting and lottery brands such as Sportpesa, Betika and Odibets becoming some of the country’s most recognizable firms.

The bill presented by the National Treasury is intended to raise tax revenues by Ksh50.4 billion to fund the Ksh3.31 trillion budget for the 2022 financial year which begins in July. According to Cabinet Secretary Ukur Yattani, the State is also keen on reining in betting describing it as “extremely addictive and can result in a variety of harmful repercussions, especially to the youth”.

Despite the sustained government onslaught on the betting industry, the sector has continued to grow.

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Data from the Betting and Licensing Control Board (BCLB) shows the number of registered betting firms increased to 100 in the year ended June 2021 defying the government’s policy to take on gambling through the higher taxes both on the companies and punters. Interestingly, more firms are being established by Kenyans.

Many of the betting firms which first hit the scene had large shareholding interests by foreigners.

In addition to the Sh7.50 taxed in excise duty for every Sh100 a gambler places as a bet irrespective of winnings, the taxman also takes 20% on winnings and levies additional taxes on the betting firms as part of efforts introduced to curb the growth of betting in the country.

A boom for the betting industry between 2014 and 2018 ended after the government announced that betting firms made a combined Ksh204 billion in annual revenues in 2018 while Kenya ranked as the largest African market for youth in sports betting. The government began undertaking various policy changes which drew ire from firms including Sportpesa.

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