Top Betting Companies set to Return in Kenya as Government Removes 20% Tax on Stake

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Match Fixing, SportPesa and Betin, Betting

President Uhuru Kenyatta has on Tuesday at State House, Nairobi, signed into law the 2020-21 Budget, the 2020 Finance Bill and the 2019-20 Third Supplementary Budget.

The Sh3.2 trillion 2020-21 Budget contains a Sh56.6 billion post-Covid-19 economic stimulus package and an allocation of Sh128.3 billion to the Government’s Big Four agenda.

The 2020 Finance Bill which is now law has several amendments targeted at cushioning Kenyans from the adverse effects of the Covid-19 pandemic.

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Some of the amendments in the Finance Act include the zero rating of VAT on maize, cassava and wheat flour for 6 months so as to make unga affordable.

Another move which will totally change the dynamics of betting in the country is removal of the controversial excise tax on betting stakes that prompted operators including Sportpesa and Betin to pull out of the local market.

President Uhuru Kenyatta has now given a go ahead to the changes ending the 20% tax on stakes during betting.

The removal of the tax was suggested by an entity named as Shade.co.ke, which said the tax “has made many betting firms strapped for cash hence cutting down on sponsorship to local sports clubs”.

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This was then adopted by the Committee, which told Shade that “the reason behind [removing the tax] was that the high level of taxation had led to punters placing bets on foreign platforms that were not subject to tax and thereby denying the government revenue”.

Shade also called for the reduction of a previously controversial 20% tax on player winnings to 10%, but the Committee rejected this, arguing that under a November 2019 ruling, the tax was no longer a large burden for operators.

The original implementation of the 20% excise tax on stakes, which was approved by MPs in September 2019, upended Kenya’s betting market. Local brand SportPesa announced that it was to withdraw from the market until the rate was changed, with another local operator, Betin, following suit.

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The tax increase that led to was just one step in a protracted dispute between Sportpesa and Kenyan authorities over tax payments.

In August 2019 the operator cancelled all sports sponsorship agreements in the country after Kenyan authorities ordered telecoms companies to block payments to Sportpesa because of a dispute over a different 20% tax on winnings, which authorities interpreted as including stakes, leaving Sportpesa with a KES60.56bn (£483.7m/$586.4m/€528.1m) tax bill. The operator said at the time it was planning legal action against the Betting Control and Licensing Board and Kenyan Revenue Authority.

In November that year, however, the previously mentioned court ruling determined that this tax only applied to player winnings excluding the original stake, and that it was to be paid by bettors rather than operators.

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Sportpesa welcomed that decision and suggested that it may prompt it to reconsider its withdrawal from the Kenyan market. However, the operator has not yet returned and was unwilling to comment on how the removal of the 20% tax on betting may affect its plans.

Sportpesa declined to comment on the Finance Bill’s advance.

President Uhuru Kenyatta’s approval of the clause to remove the excise tax comes as a shock, as he has spoken out against the industry in the past.

In August last year, Kenyatta called upon the country’s lawmakers to pass a total ban on gambling in the country, also warning that he expected bookmakers to pay in full any taxes considered to be owed to the authorities.

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“We have this thing called gambling and it’s so bad, I alone can’t finish it – go change the constitution,” Kenyatta said, according to local media reports.

Kenyatta also encouraged MPs to “introduce and ensure that tougher laws are passed in Parliament”.

In November 2019, a report on possible constitutional changes in the nation suggested that the private betting industry should be shut down and replaced with a state-sponsored national lottery. The Building Bridges Initiative (BBI) report, commissioned by Kenyatta’s administration, claimed that the private betting industry “is leading to hopelessness and greater poverty”.

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Last month, Betsson-owned operator Betsafe agreed two new sponsorship deals in Kenya, with Nairobi-based rivals Gor Mahia and AFC Leopards, both of which had previously been sponsored by Sportpesa. The operator said at the time it was planning to enter the Kenyan market “in the coming months”.

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