Online sportsbook operator SportPesa has reportedly filed a lawsuit, contesting the Kenyan government’s decision to raise annual gambling taxes to 35% on net revenue. Here it is important to note that gambling operator originates from the East African country.
It can also be said that Kenya is one of SportPesa’s key markets. The country’s online gambling segment has grown significantly over the past several years, due to the widespread and quick penetration of smartphones. Young males aged 17-35 have been the largest gambling demographic, betting predominantly, but not exclusively, on English Premium League matches.
It was last month when Kenyan President Uhuru Kenyatta signed the previously proposed Finance Act 2017 that set the gambling tax to 35% on full-year revenue. Under an original proposal, the rate had had to be raised to 50%, but that one had not gained much support among lawmakers. The new tax rate applies to all gambling services offered to Kenyan customers, including betting, casino, lottery, and competition activities. It is set to come into effect on January 1, 2018.
The new 35% tax represents a significant increase from the existing tax on gambling. Operators servicing local players are currently paying a 7.5% tax.
Kenyan officials have explained that the new tax rate has been implemented to discourage minors from gambling. As mentioned above, teenagers and young people have been among the most active gambling groups and different organizations have voiced concerns about their overexposure to this type of services and the negative effects they have.
However, opponents of the measure have pointed out that the new tax would result in operators leaving the market, which will, in turn, reduce significantly the amounts of tax proceeds entering Kenya’s coffers.
Reports emerged in local media earlier this month that SportsPesa was planning to leave its domestic market as a result from the newly imposed tax, as it would hit its profitability severely. Company officials denied those reports shortly after, arguing that Kenya was still a jurisdiction that was of great interest to invest into. Aside from Kenya, the sports betting operator also offers its services in Tanzania, South Africa, and the UK.
Although SportPesa seems to be planning to remain in Kenya for the time being, it has warned that it would withdraw all its football-related sponsorships from January 1, 2018, if the new tax is implemented. It currently sponsors AFC Leopards and Gor Mahia, known to be two of the country’s largest football clubs, as well as the Kenya Football Federation, and the Kenyan Premier League.
