Government officials in Kenya are proposing to reinstate the contentious 20 percent betting tax rate that caused sports betting brand Sportpesa to withdraw its operations from the country in 2019. The Financial Bill for 2022 will be the vehicle for implementing the reform.

Modifications to the Excise Duty Act of 2015

On April 12, the National Assembly passed the 2022 Financial Bill, which was then forwarded to the Departmental Committee on Finance and National Planning. The bill seeks to amend the First Schedule to the Excise Duty Act 2015, which would raise the excise tax rate on a number of products and services, including betting, from the current 7.5 percent to 20% rate. The excise duty will be raised in the following categories: betting and gaming, prize competitions, and lotteries. In addition, the government is proposing a new 15 percent tax on fees collected by television, print media, billboards, and radio stations for gambling and gaming advertisements, which will have a further negative impact on the gambling business.

Although Treasury Secretary Ukur Yatani stated in his budget speech that the proposed tax hikes are part of a package that is intended to generate additional revenue of KES50.4 billion ($433.4 million), according to Dutch-based Big Four accounting organization KPMG, the amount is relatively small when compared to the overall budget of over KES2 trillion ($17.2 billion) and “is indicative of the shrinking avenues for raising additional revenue in an economy that is in turmoil.” In a statement on the excise tax increases, KPMG stated that the government will be increasing excise taxes on the majority of taxable products in order to close the revenue shortfall.

A consultation period on the bill has been announced, during which the Treasury will collect evidence from stakeholders until May 4. However, given the position of Yatani, who has stated openly that the previous decision to lower the tax rate in order to appease stakeholders should not have taken place at all, any favorable changes are unlikely.

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Lessons from the Past Have Not Been Learned

Sportpesa decided to withdraw from Kenya in September 2019 as a result of the Kenyan government’s decision to double the country’s 10 percent excise tax on sports betting to 20 percent. The company also canceled its active sponsorships with local football clubs and downsized its local employees as a result of the decision to withdraw from the country. Upon the recommendation of the Parliamentary Finance Committee, which expressed concern that the higher tax rate was causing operators to leave the market and so resulting in decreased tax collection, the country totally abolished the tax starting in 2020. According to data provided by operators such as Sportpesa, a proposal to restore the tax rate to 20 percent through the 2021 Financial Bill was altered by the Finance Committee, which cut the rate to 7.5 percent in 2021. After formally re-establishing itself in the country in 2020, Kenya’s number one sportsbook was compelled to close its doors by the country’s Betting Control and Licensing Board (BCLB).

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