A recent ruling delivered by Milimani Commercial Courts Chief Magistrate Peter Gesora recently allowed KRA to collect withholding taxes on bet winnings.
However, in a controversial twist the taxman differed with industry members on what winnings were as stipulated in the Finance act of 2018.
The Finance act 2018 stipulates that winnings include, “winnings of any kind and a reference to the amount or payment of winnings shall be construed accordingly. “Industry members protested the statute as being ambiguous and vague”.
KRA’S interpretation led to disquiet among industry members as they initially sought to impose a 20% withholding tax on gambling winnings plus the staked amount.
Taxing the stake and the win would have meant that the player had no reason to play as industry wrote to KRA and would serve to drive gamblers to underground betting shops that did not pay withholding tax.
Sportpesa head Ronald Karauri had opined that KRA’s plan would have led to business closure as it would make their business completely unviable.
KRA had recently slapped Sportpesa with a controversial Sh10.3 billion tax penalty further deepening the dispute surrounding the interpretation of the term “winnings”.
However during the budget reading done today for the fiscal year 2019/20 the CS Treasury Henry Rotich has proposed instead to replace the withholding tax with a 10% excise tax on amount staked.Meaning therefore that punters will be taxed even before they place their bets.
Just loading money onto your betting wallet and you will already owe the government 10% of the amount staked. Meaning if you want to bet using Sh1,000 you cannot because the government already owns 10% of it thus you can only stake Sh900.
This news has caught many members of the ecosystem off guard with punters taking to the interwebs to criticize the move terming it as unfair and predatory. People have concluded that the cash crunch in government is more serious than they thought and the government is now rummaging through scraps.
Members of industry have yet to comment on the new proposal but one can expect they are not too thrilled with the new development.