Tax from betting companies has tripled in two years as online gaming sites gain traction in the country, Kenya Revenue Authority has revealed.
In a presentation to Parliament’s Labour and Social Welfare Committee regarding the Betting, Lotteries and Gaming (Amendment) Bills 2016, KRA Commissioner General John Njiraini told MPs the fast-growing industry has helped expand the tax base.
He said eight of the 25 licensed betting companies had paid a total of Sh4.7 billion in the financial years 2014/2015 and 2015/2016.
He said other taxes from the industry such as PAYE, VAT and income tax are projected to more than double by the end of the current financial year 2016/2017 from Sh1.2 billion last year to about Sh3.4 billion.
“The philosophy for taxing betting, lotteries and gaming revenues is partly to discourage gambling while also creating avenues for raising revenue. The application of this principle nevertheless requires moderation in relation to the imperative to ensure business continues to operate and thrive,” Njiraini told the committee chaired by Matungu MP David Were.
The draft law sponsored by Gem MP Jakoyo Midiwo proposes new and higher taxes on the gaming industry among other proposals that have faced stiff opposition from the industry and government agencies such as regulator Betting Control and Licensing Board as well as the Ministry of Interior under which BCLB falls.
The Bill proposes a tax charge on winnings at the rate of 20 per cent, an increase in betting tax from 7.5 per cent to 15 per cent as well as higher lottery tax from five to 20 per cent and gaming tax from 12 to 20 per cent.
Njiraini said numerous and high taxes are counterproductive as they drive investors away and create room for illegal business to sprout leading to loss of revenue for the government.
He said the KRA preferred online gaming activities to waging bets in because of the paper trail left by online transactions which make it easier for the authority to determine taxes due.
The tax agency was however at pains to explain how to tax online gaming firms that have no presence in Kenya.
It was hence given two weeks to deliberate on this with the Communication Authority of Kenya and recommend regulations that could bring these offshore online firms benefitting from Kenyans into the tax bracket.
The Bill proposes to block gaming operators from using e-platforms such as M-PESA and instead directing that betting firms come up with their own platforms to engage their customers.
Njiraini said this would work against the government as it would make it difficult for the state to verify revenue data from the firms when computing taxes due.
The Bill is currently on its second reading in Parliament. The committee is expected to table a report in the House following deliberations with various stakeholders.