SportPesa founder kicks off plans to shut operations in Kenya

SportPesa says it will be forced to close its Kenyan operation and move to other countries with favourable taxation laws.

The gaming company is considering shifting base to Tanzania or the United Kingdom (UK) in a move that could lead to loss of tens of jobs in Kenya, the Business Daily reports, if the law prescribing a 35 per cent turnover tax for the industry is not repealed.

SportsPesa Global chief executive officer (CEO) Gerasim Nikolov says the company can no longer operate profitably under the new tax policy.

“There is nowhere in the world where such a huge tax is levied on turnovers and even here in Kenya, no firm can survive today if a 35 per cent tax was put on its turnover,” he said. “Unfortunately, the ultimate effect of us shifting operations from here will be wide considering the various business that depend on this industry.”

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President Uhuru Kenyatta signed the Finance Bill 2017 into law which, among others, imposes a uniform 35 per cent tax on all gambling revenue – betting, gaming, lotteries and prize competitions.

Before, licensed sports betting operators had been subject to a 7.5 percent betting tax.

The government is targeting to reap higher tax revenue from the fast-growing industry.  “You cannot run a business just to pay tax to the government,” said SportPesa Kenya CEO Ronald Karauri, who also chairs the Association of gaming Operators (AGOK). “It is not worth the sweat and were we not present in the UK and Tanzania, we would just wind up….this is a death sentence to the whole industry.”

Last month, the SportPesa founder announced the withdrawal of sponsorship for local sports clubs from January citing the new tax burden. The firm, founded in Kenya in 2014, currently sponsors Gor Mahia and AFC Leopards, Kenya’s biggest football teams, as well as the Kenyan Premier League (KPL) and the Kenya Football Federation.

The firm recently opened Tanzania operations and announced a Ksh2.2 million sponsorship for the Serengeti Boys football team.

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Parliament initially slapped a 50 per cent tax on sports betting sites and lottery companies, but later lowered it to 35 per cent before Mr Kenyatta signed it into law.

The Kenya Revenue Authority (KRA), which collected Sh4.7 billion in revenues from gaming firms, had proposed that the tax be doubled to 15 per cent to be at par with what Rwanda (13 percent) and Ghana (17.5 percent) levies.

The 35 per cent tax would yield more revenue to the government, but will in the long run drive away investors and trigger transfer pricing by players. (copyright: Business Daily)

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