Impact of Finance Act 2016 on Betting, Lottery and Gambling Industry
Kenya gazetted The Finance Acts 2016 on 20th September 2016 with significant amendments to the Betting, Lotteries and Gaming Act.
The amendments may affect growth of the gambling business in Kenya as the new taxes levied may reduce total business turnover in the gambling industry. Betting, lottery, prize competition and gaming sectors of the gambling industry taxes were adjusted higher to the following margins.
|TAX CHARGEABLE||TAX PERCENTAGE|
|BETTING||Betting tax chargeable||7.5% of gaming revenue|
|LOTTERY||Lottery tax chargeable||5.0% of lottery turnover|
|GAMING||Gaming tax chargeable||12.0% of gaming revenue|
|PRIZE COMPETITION||Prize competition tax chargeable||15.0% of total gross turnover|
Note: Gaming revenue means gross turnover less amount paid to customers as winnings
According to PricewaterhouseCoopers (PwC) Gambling Outlook: 2015-2019 report, taxes and levies amounted to 3.2% of gross gambling revenue in the local gambling industry in 2014. Fast forward to 2016, taxes and levies have increased by 208% to an average of 9.87% of gross gambling revenue.
The government is looking to increase its revenue collection in the fast growing gambling industry in Kenya. The above stated report forecasted 7.50% growth of the gambling industry year on year. The introduction of higher taxes may reduce the growth prospect slightly as proprietors’ income which would have been reinvested in the business would be siphoned off through taxes.
Prize competition games may be significantly affected by the amendments in the Finance Act. In accordance to the act, prize competition tax chargeable would be levied on the cost of entry to a competition which would be premium rated at the rate of 15.0% of total gross turnover. This means that competitors would be charged a tax premium when they enter the competition rather than when they win. This may discourage competitors as it will be more expensive to enter prize competitions.
Betting games which are currently booming in the local industry may also take a hit if the business owners decide to pass the tax charged to its clients. The cost for placing a bet may increase to cover for tax provisioning.
All in all, higher taxes may result in slowdown of the gambling industry as business proprietors reevaluate return on their investments.