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Betting agency rejects tax proposals in Bill

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The Betting Control and Licensing Board has rejected tax proposals contained in a draft Bill meant to regulate the growing gambling industry.

In what could kill the proposed law by Gem MP Jakoyo Midiwo, the agency says most of the taxes contained in the Bill are either a duplication of existing ones or are unrealistic.

Known as the Betting, Lotteries and Gaming (Amendment) Bill, 2016, the draft law has suggested higher taxes and tougher regulations for players in what Mr Midiwo argues is to improve on a lax regime that has allowed betting companies to evade taxes.

First, the Bill seeks to introduce a winnings tax, which would be some sort of withholding tax for gamblers. It will be chargeable at the rate of 20 per cent of all winnings, which the board disapproves of.

“Withholding tax has already been tried and posed a challenge due to the nature of some of the gaming activities,” said the agency.

It added: “The best way would be to make income from gambling above Sh100,000 taxable at normal rates and the onus be on the winner to declare the same, while the operators file the requisite documentation.”

In proposals to be tabled to the National Assembly’s Labour and Social Welfare Committee, the agency said other taxes suggested were already addressed in the Financial Act.

For instance, the Bill wants betting tax to rise from 7.5 to 15 per cent, lottery tax from 5 to 20 per cent, gaming tax from 12 to 20 per cent and tax charged on prize competitions to increase from 15 to 20 per cent. But the agency said these taxes were being changed before they could even work.

“The [new] tax comes into effect from 1st January 2017 and there is no need to vary the same before it is even implemented,” says the board in proposals seen by the Nation, citing the 2016 Finance Act, which took effect on January 1 this year.

Said the board: “It should further be noted that lotteries devote between 35 and 45 per cent of their lottery gross proceeds to good causes hence any additional tax would make it difficult to operate and meet their key obligation of funding good causes.”

The draft law reached its second reading last week amid opposition from industry players who argued the Bill would discourage foreign investment in the country.

Mr Ronald Karuru, CEO of betting firm SportPesa and chairman of the Association of Gaming Operators – Kenya, argued the Bill had created a wrong impression that betting and gaming companies were conduits of money laundering.

“Everything is online, transactions are with the bank and it is impossible to do any money laundering, especially with online gaming,” he told the Committee.

The Association says that the proposal to lock out firms from doing online betting will not solve the perceived ills from gambling as they would remain accessible to Kenyans even when hosted abroad.

The nascent industry has grown fast since late 2013 when online betting firms emerged, allowing Kenyans to place bets through their mobile phones. Estimated to generate about Sh2.5 billion in revenues, major players have been investing heavily to reap from the potential. In 2014, Sportpesa, for instance invested Sh400 million.

Now there are other players like Betway, Beitin and Mcheza.

Mr Midiwo’s law has proposed that online betting be limited only to Kenyan investors, wants the minimum age of participants be changed from 18 to 25 and seeks to limit winnings from gambling to Sh30 million as a way of checking excessive and addictive gambling.

But the Board says universal law already recognises anyone above 18 as an adult. While it agrees that a limit of winnings be set, the Board says it will suggest appropriate restrictions to various platforms. It also opposes restrictions on use of mobile phone companies for betting saying online betting relies on their service to thrive.

However, it says there is already a proposal to ensure all foreign firms have a 40 per cent of shares owned by Kenyans.

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