Kenya: Tax hike makes betting company to withdraw sponsorship deals




n June 2017, Kenyan President, Uhuru Kenyatta signed into law the 2017 Finance Bill which among other things, imposed a uniform 35 percent tax rate on all gambling revenue – betting, gaming, lotteries and prize competitions. This law came into effect on 1st January 2018. Previously, Kenya-licensed sports betting operators such as SportPesa had been subject to a rate of just 7.5 percent.  The 35 per cent tax on all gambling revenues is comparably higher than other African countries like South Africa which charges 9.6 per cent, Rwanda 13 and Uganda 20.

The East Africa Tax and Governance Network Coordinator published a blog on this titled “SportPesa: Contradictions In Kenya’s Quest For Tax Justice”.

The blog opines that the CEO of the giant betting company SportPesa withdrew all support for local sponsorship over the 35 per cent gambling tax hike. His qualms with current government proposals on sporting betting operations tax are unfair in as much as they solely burden betting companies unlike in the tobacco or alcohol industries where the ‘sin tax’ is passed on to the consumer. SportPesa’s withdrawal of sports sponsorships has been met with an immediate backlash as its actions smack of blackmail especially as the public perceives the company to be more comfortable with paying higher taxes in western jurisdictions, where it operates, as compared to local rates.

This raises issues of tax injustice in regards to why a local company would be more comfortable with following rules in foreign lands as opposed to its own homeland. Kenya’s tax rates are comparatively lower to those of other countries around the world where it willingly pays more.

The blog argues, that for Kenya to expand its tax base, then measures such as this are necessary in order to generate the much-needed domestic resources for sustainable development. He says “responsible corporate governance should understand that engagement with government should help in the achievement of fair taxation in line with the Kenyan constitution and current tax law beyond the rights of businesses so as to adequately pursue sustainable development.”

He urges the government to ignore the old big corporate interference script to push scaremongering or confusing arguments like; the tax effect will lead to losses in jobs, incomes and the relocation of the company to tax havens – all of which have already been done before.

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