Kenya’s proposed tax hike on all gambling revenue has been met with a backlash from the industry, but no operator has vowed to leave the country – yet.
On 21 June, Kenya’s president Uhuru Kenyatta signed into law a tax hike of 35 percent on gambling revenues as part of the country’s Finance Bill, a significant increase compared with the current 7.5 percent tax rate.
However, the new bill marked a climb down from the previously proposed 50 percent on betting revenues, which Kenya’s parliament rejected after operators decried the tax as punitive and business killing.
But the new rate of 35 percent has only dampened the outcry – with the devil in the details of the bill. The amended tax is uniform on all forms of gambling, not just betting as originally intended.
In other words, the taxman will be entitled to revenues from lotteries, casinos and prize competitions, too. The latter three are currently on tax rates of five, 12 and 15 percent, respectively.
“I don’t think the tax will be too damaging. From the government’s perspective, most of the businesses had paid little in taxes,” Yahaya Maikori, chairman of consultancy firm Global Gaming Africa explained.
“The previous rates were very low compared to other jurisdictions.”
“And in any case, the government was finding it very difficult to enforce the tax and determine exactly how much was due from the taxes.”
Warwick Bartlett, chief executive of GBGC, takes a more critical view of the decision.
“There are other jurisdictions that have high tax rates but the population normally has high disposable income. So the operator has sufficient volume to make the enterprise economic.
“To illustrate, there are roughly 43 casinos in Kenya for a population of 45 million, compared to the UK, which has 148 casinos for a population of 65 million. However, UK income per capita is 12.3 times greater than Kenya.
“The industry will either consolidate and absorb the tax, or find ways to pass the tax on to the customer either through a cover charge or a deduction from winnings. But this will make casino play unattractive to the gambler.”
In a memo to the speaker of the National Assembly (the lower house of the Kenyan parliament), president Uhuru Kenyatta claimed that the proposed tax hike was necessary to curb Kenyan youth involvement in betting activities, consistent with previous legislation.
However, Bartlett reckons the decision to raise taxes in the name of responsible gambling may deliver the opposite outcome.
“My view is that swinging tax increases of this size very often do not have the desired effect the government was hoping for,” Bartlett said.