Sports betting operators in Kenya have secured a legal victory over how wagering is taxed in their battle with the government.
Business Daily announced on Thursday that the Nairobi Tax Appeals Tribunal had sided with the country’s two largest betting companies, SportPesa and Betin, who argued that the government’s new betting tax of 20 percent applies only to the net winnings of punters, not their betting stakes.
The Kenya Revenue Authority (KRA) pursued local betting operators to obtain the contentious 20 percent tax on punters ‘ gains, which came into effect on July 1, 2018. Nonetheless, betting operators and the gambling public were questioned by the KRA’s revised interpretation of winnings, which held that the tax applied to all the money that operators paid to win bettors, including their initial betting stake return.
The Tribunal also transferred the responsibility for paying the tax on individual punters rather than deducting the tax at origin from the operators. It is claimed that the purpose of the Tribunal was to protect betting operators from prosecution by what has now turned out to be a very hostile state.
SportPesa and Betin were among 27 operators whose licences were suspended by the BCLB of Kenya on July 1. The KRA charged the bookies with owing hundreds of millions of dollars in unpaid taxes and revoked their networks for digital payment processing. In the end, both SportPesa and Betin were forced to suspend their operations in Kenya and lay off hundreds of employees.
It is uncertain what impact the tax decision on Thursday might have on the ability of either company to restart its local operations, as the BCLB’s last word was that suspended operators would have to “apply fresh” for new licences.
In the past, SportPesa has won legal skirmishes over similar gambling tax issues, but the state has only redoubled its efforts to force operators to fill the coffers of the government.
Just this week, the KRA put Betika betting operator in its crosshairs, looking for SH1.75b ($17 m) in tax arrears and asking a court to let it take the money from the bank accounts of Betika. Betika was one of the few Kenyan-licensed companies that from the outset placed on their customers the KRA version of the winnings fee.