Gambling Regulator Opposes Tax Reversal in Kenya

(AsiaGameHub) –   There is growing pressure on the Kenyan government regarding proposals to introduce a 20% tax on winnings, which would overturn last year’s reduction of the rate to 5%.

The gambling regulatory authority has appealed to the government to perform another about-face and discard these plans, arguing that they would be difficult to enforce and damaging to the sector.

Less than a year ago, the withholding tax was lowered to 5%, with the tax applied upon a player’s withdrawal from their betting account.

Nevertheless, policymakers are currently aiming to restore the rate to 20% and apply it to winnings, excluding the player’s initial stake.

Additionally, such a swift reversal from the 5% rate would likely exacerbate tensions within the industry. This is further complicated by the fact that a 5% tax already applies to ‘all funds for gambling purposes’.

The bill specifies: “Amount deposits means the total value of money or money’s worth paid, transferred or otherwise made available for betting or gambling purposes. Whether provided by a player or the operator, whether in cash or cash equivalents, whether or not such amount is held in an account operated by a player, operator or licensed person, or converted into chips, tokens, tickets, credits, or similar instruments.”

A continuous struggle has persisted within the country, and the regulator’s recent direct address to the National Assembly’s Committee on Finance and National Planning in Nairobi has only served to intensify this conflict.

The regulator is also pushing back against the suggested definition of winnings, warning that it would create significant confusion in the market regarding how gambling is taxed.

In particular, they stressed that the 20% withholding tax on winnings from prize competitions and short-term lotteries should be abandoned, as it is deemed unnecessary and unworkable for the market.

Specifically, the authority raised the issue of how the tax would be collected if the prize awarded is a physical item, like a car or washing machine, rather than a cash sum.

The organization also pointed out that tax revenue has actually grown under the 5% system, in contrast to the previous period when the withholding tax was 20%.

The core reason for the call to pause is the need for tax simplification, as the current proposed framework is missing the clarity and nuance needed for such a complicated sector.