Betting and gaming industry players have warned that the proposed value-added tax (VAT) on betting and the increase in excise duty to 20 percent risk triggering the disappearance of at least 80 percent of all sportsbook bets in the Kenyan market, rendering investment in the sector unviable and triggering capital flight.
Impact on Sportsbook Betting
Sportsbook betting refers to the act of risking one’s money on the outcome of a sporting event to make a profit. The Finance Bill, 2024 has proposed the deletion of paragraph 17 from Part II of the First Schedule of the VAT Act, a proposal that, if effected, will bring to an end the exemption of betting, gaming, and lottery from VAT in Kenya. The Bill also proposes to increase the rate of excise duty on betting and gaming from the current 12.5 percent to 20.0 percent.
“The betting sector pays Sh1.6 billion per month in the form of taxes to the exchequer through excise duty, betting tax, and withholding tax on winnings. The top seven betting companies have paid in excess of Sh10 billion, including corporate income tax, for the first six months of 2023/24 to the exchequer. These revenues are largely driven by sportsbook betting, and the consortium is concerned that with the introduction of VAT and an increase in excise, approximately 80 percent–85 percent of sportsbook bets will disappear,” the consortium told the National Assembly’s Finance and Planning Committee during its submissions on Finance Bill 2024.
Declining Revenues
Data tabled by the consortium before the Finance and Planning Committee shows that gross gaming revenue has been on a general decline in Kenya, falling from Sh46.8 billion in the financial year 2018/19 to Sh17.4 billion in 2022/23. In the same period, betting tax collected by the Exchequer has fallen from Sh7.0 billion in 2018/19 to Sh2.6 billion in 2022/23.
The consortium has warned that the measures proposed in the Finance Bill 2024 risk collapsing the industry, wiping out the remaining revenues and tax income. “In Africa, apart from Ethiopia and South Africa, no other country charges VAT on betting services. Even so, these countries (Ethiopia and South Africa) do not charge excise duty on betting, and the betting tax in South Africa is significantly low at 6.5 percent of gross gaming revenue compared to 15 percent in Kenya. Ghana had introduced VAT on betting services but scrapped it on January 1, 2023, following a dramatic reduction in onshore betting and tax revenues,” the consortium told the parliamentary committee.
