Tuesday, 11 April 2017

Kenya’s gaming industry hit hard with taxes

Kenya’s National Treasury Cabinet Secretary, Mr. Henry Rotich, has taken Kenya’s gambling industry by storm after imposing flat rate of 50 per cent tax on gambling industry.
He took some serious measures in the financial year of budget 2017/18. In the budget statement to Parliament, Mr. Rotich announced “Betting and gaming have become widespread in our society in an environment that is inadequately regulated. Its expansion is beginning to have negative social effects particularly on the youths and vulnerable member of our society.  I therefore propose to raise taxes for betting, lotteries, gaming and competition from the current rates of 7.5, 5, 12 and 15 per cent respectively to a uniform tax of 50 per cent for all categories,”

The tax levied by Mr. Rotich came as a shocker to the gaming operators. Mr. Ronald Karauri, Chairman of the Association of Gaming Operators of Kenya, believes this measure is only going to harm legal gambling operators and would result in growth of illegal gambling.

He said -"The government is out to kill legal businesses and the huge tax increase will only lead to the proliferation of backstreet gambling." 

It is astonishing to see lotteries tax jumping from 5 per cent to 50 per cent. Let me give you a brief insight about generic stats of lotteries in the emerging markets.

 
*These are indicative numbers
Now (In Kenya)

*These are indicative numbers

With such a high tax rate, the lottery can no longer remain profitable and at the same time remain attractive to the players.

Kenya’s gambling industry growth is in doldrums now. This measure taken by the government would provide a boost to the illegal gambling at the cost of licensee who has invested in this business and is contributing to the country’s GDP.

The increase in tax will not only affect the operators but the intermediaries, players and ultimately to the nation’s economy.


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