Betting firms and gamblers have marked an unprecedented gain after MPs voted to withdraw excise duties levied on punter’s stakes charged at the rate of 20 percent on Tuesday.
The proposal to shoot down the tax was carried as a new ammendment to the 2020 Finance Bill and was backed by the Finance and National Planning Committee recommendations after it subjected the bill to public participation.
In its report to the house that preceded the vote by the whole house, the Finance Committee consulted an entity only named as shade.co.ke which proposed the removal of the levy as it had many betting firms cash-strapped hence cutting down on sponsorships to local sports clubs.
“The proposal to remove excise duty on the stake placed by punters was adopted. The reason behind this was that the high level of taxation had led to punters placing bets on foreign platforms that are not subject to tax and thereby denying the government revenue,” the Finance Committee had noted in its report to the house.
The 20 percent excise duty levied on stakes placed on betting platforms had only come into being last year through ammendments carried in the 2019 Finance Bill under the then Treasury Cabinet Secretary Henry Rotich.
Punters placing bets saw 20 percent of the betting amount retained by betting platforms as tax while the betting firms had been required to submit the levied duties on the 20th day of each month to the Kenya Revenue Authority (KRA).
Seen by critics as a move by government to kill off the betting industry, the adoption of the levy saw betting firms face off with government over the legalities of the tax.
Decrying double taxation, local betting firms among them SportPesa and Betin moved to court to oppose the taxation in a back and forth discourse which would end in the two folding their Kenyan operations after the courts ruled in favour of the tax man.
KRA had been demanding billions of shillings from the betting firms in unremitted excise duty taxes dating back to July 1, 2019 when the year’s Finance Bill took effect.
In their argument, betting firms objected to the proposal as it not only levied tax on wagers but also profits earned by a punter.
The deadlock saw the Betting Control and Licensing Board (BCLB) withdraw licenses to multiple betting firms marking the end of existence for most.
Local sport clubs felt the wrath of tax fallout as leading betting firms withdrew their sponsorship deals with some exiting the domestic market for greener pastures elsewhere.
The removal of the excise duty will stand as law if President Uhuru Kenyatta assents to the Finance Bill as passed by the National Assembly.
The relief to betting firms and punters will ease pressure on the industry which had emerged as one of the most taxed around the world.
On top of the usual corporate tax levied to betting firms, the entities account for a further withholding tax charged at the rate of 20 percent on winnings paid to punters following ammendments carried in the 2018 Tax Laws (Ammendment Bill).