Gambling firms will channel half of their turnover to the national coffers after the government increased betting, lottery, gaming and prize competition tax from 7.5 per cent to 50 per cent.
It is the biggest tax adjustment in Kenya’s history and is expected to create a dramatic paradigm shift in the lucrative gambling industry in the country.
Betting, lottery, gaming and prize competition firms have been paying 7.5 per cent, 5 per cent, 12 per cent and 15 per cent of their gross revenues to the taxman respectively.
But presenting the 2017/2018 fiscal budget in the National Assembly yesterday Treasury Cabinet Secretary Henry Rotich applied a uniform tax rate of 50 per cent for all categories.
He made the unprecedented move, deemed punitive in a bid to tame the hugely unregulated multi-billion shillings industry.
“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, in particular on the young and vulnerable members of our society,” he decried.
He said the proceeds will be put in the newly created National Sports, Culture and Arts Fund to support development of sports, culture and arts in Kenya.
Rotich’s move is expected to cause huge profit bleeding for the investors in the industry who will be forced to rethink a counter strategy to cushion their balance sheets.
It remains to be seen what ripple effect the new tax regime of betting and gaming firms will have on Kenyans.
But it will be a delicate balancing act for the firms who may try to pass the tax burden to the consumer while trying in earnest to keep their appetite for betting stimulated.