Kenya’s approved gambling tax hike is already taking its toll as native operator SportPesa has confirmed that it would shut down its Kenyan operations, if the new taxation regime is imposed on January 1, 2018.
In June, Uhuru Kenyatta, President of the East African nation, signed into law the Finance Act 2017. Among other things, the legislative piece introduced a 35% tax on all gambling services provided to local customers, including sports betting, gaming, lottery, and competition activities.
Under an original proposal, the tax rate had been raised to 50%, but that proposal had not been approved by the majority of government officials. Here it is important to note that Kenya-facing operators are currently required to pay a 7.5% tax on their net revenue. The newly approved regime will, too, tax gambling companies on their annual revenue.
Shortly after news about the massive tax increase spread last month, SportPesa was among the first to vocalize its discontent with the move. The company threatened to end its sponsorship of the Kenyan Premier League, if the 35% rate was implemented. Now, the company seems to have decided it was worth leaving the local market as a whole.
Commenting on that decision, SportPesa Kenya CEO Ronald Karauri told local media that no Kenya-facing business will be able to survive such a hike on their net revenue. The executive further noted that they could bear an increase on profit, but revenue was out of the question.
Gambling representatives believe that the new tax will produce the exact opposite effect that the government has hoped for, that is it will endure losses instead of increases in annual tax proceeds.
As already pointed out, the revised taxation regime is set to take effect on January 1, 2018. If this happens, SportPesa will leave the local market and will focus on its operations in other jurisdictions. At present, the operator services gambling customers from South Africa, Tanzania, and the UK.
Kenya is among the fastest growing gambling markets in Africa, mainly due to the quick mobile and smartphone penetration in the country. Recent figures showed that the mobile penetration rate in Kenya was 83% with a 60% smartphone diffusion rate. Young men between 17 and 35 have proved to be the largest gambling demographic in the sub-Saharan Africa nation. They have been using their mobile devices to predict the outcome of local and international football matches, with the English Premier League being a bettors-favorite. It is believed that the great interest in English football has in fact been what has spurred the Kenyan gambling industry’s rapid growth.
