President Kenyatta sends warning to Kenyan betting firms

President Uhuru Kenyatta has issued a subtle yet stern message to Kenyan gambling companies, reminding them of their requirement by law to follow the existing regulations as they go about their businesses.

Speaking in Nairobi on Saturday during the 60th anniversary celebrations of Christ Is The Answer Ministries (CITAM), the Commander-in-Chief insisted that “so long as people continue to gamble, Caesar must get his share”.

This comes in light of the prolonged battle between the national government and gambling companies – one that has seemingly formed a labyrinth with no end.

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Trouble first brewed back in July when Kenya’s Betting Control and Licensing Board (BCLB) refused to renew the operating licenses of 27 gambling firms for the current financial year, arguing that the companies had failed to comply with the existing laws.

The laws in question are linked to the paying of taxes, where the Kenya Revenue Authority (KRA) is accusing gambling companies of owing tax arrears of up to KES 61 billion (USD $610m).

The issue, which has transformed into a full-blown tax dispute, is subject to a ruling by the High Court of Kenya, which is on recess until September 15, 2019.

The Income Tax Act, as per the amendment of the Finance Act 2018, introduced a betting tax amounting to 20 per cent of winnings.

The bone of contention lies in the fact that the legislation states that “winnings include winnings of any kind and that a reference to the amount or payment of winnings shall be construed accordingly”.

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Going by the vague nature of the definition, the betting firms and the taxman have different interpretations of the regulation.

The betting firms are counting on an old definition prior to the Finance Act 2018, which interprets winnings as “the positive difference between the payout made and stakes placed in a given month, for each player”.

According to this provision, a player who places a bet of $100 and wins $10 would owe a withholding tax of $2, which is 20 per cent of the winnings. The player would then be left with $108, consisting of a $100 stake and $8 in winnings.

The KRA, however, has interpreted winnings as the gross amount of the payout to punters, including the amount staked. Going by the same example, if a player places a bet of $100 and wins $10, the player would pay a tax of $22 and walk away with $88 – an overall loss of $12, despite winning the bet.

It is this loophole in the law that has made the Kenyan government bully the betting firms into submission, with the president arguing during his speech on Saturday that “there is no reason for a few individuals to benefit from gaming companies who are claiming to sponsor athletes and sportsmen”.

The stalemate has taken a sharp political turn, as 12 Members of Parliament came out last week in opposition of the government’s decision to revoke the operation licenses of some betting companies.

Led by Senator Cleophas Malala of Kakamega, the lawmakers argued that the directive has left many Kenyans jobless, further stating that accusations of noncompliance against betting companies like SportPesa and Betin hold no water.

Senator Malala also added that the taxation of punters’ stakes is equivalent to taxation of capital, which is a direct violation of the existing laws.

Following the revoking of their operating license and shutting down of their paybill numbers, SportPesa recently withdrew from all sports sponsorship deals in the country.

Without question the biggest and most popular betting firm in the country, the ripple effects of SportPesa’s decision will be adverse and far reaching, as the Kenyan Premier League still has no official sponsor with the 2019/20 domestic season set to kick off on Friday, August 30.