Kenyan betting operator SportPesa began informing local sports clubs that it would withdraw its sponsorship following a High Court ruling issued yesterday that supported the upcoming implementation of a betting tax increase.
Kenya-facing betting operators are currently required to pay 7.5% on their full-year net revenue in taxes to the country’s coffers. However, this is about to change as under the country’s Financial Act 2017, the betting tax rate will be increased to 35%.
The new taxation regime was proposed by Kenyan lawmakers and signed by President Uhuru Kenyatta earlier this year with the purpose of curbing the proliferation of gambling in the country. The new 35% rate will apply to all types of gambling services provided in the country, including casino gaming, raffles, lotteries, and betting.
High Court Judge John Mativo issued on Thursday his ruling on a case previously filed by SportPesa and other gambling operators. Betting firms contested the Financial Act 2017 and its betting tax provisions, arguing that these were infringing on their rights to property.
On Thursday, Judge Mativo ruled that the new betting regime was enacted in a completely legal manner and that given the fact that proceeds from the tax would be serving public interest, the new tax rate did not infringe upon gambling operators’ rights. Money from the increased betting tax are planned to fund culture, sports, and the arts. The new rate will come into effect from January 1, 2018.
Nick Mwendwa, President of the Football Kenya Federation, told local media that they have been informed that SportPesa was putting an end to its sponsorship due to the implementation of the new tax. Mr. Mwendwa revealed that they would thus lose KES120 million in annual contributions from the operator.
Local football clubs AFC Leopards and Gor Mahia are also about to lose their title sponsor, SportPesa. Club officials have been urging all affected parties to lobby the Kenyan government to review its betting tax decision and introduce a taxation system that will not chase away important sponsors.
Why Is Betting Popular in Kenya?
Betting has become particularly popular in Kenya over the past several years. In general, gambling in the country takes place through mobile phones as local phone-based financial services have made it possible for customers to bet, withdraw winnings, and pay off losses on their smartphones without having to provide bank account details.
According to industry officials, around 7 million people of Kenya’s 45 million population are registered for such betting services. Young male Kenyans represent the country’s largest group of betting customers. The implementation of the 35% betting tax was justified namely with that proliferation of gambling among young and vulnerable people.
Kenyan lawmakers have so far remained firm on their decision to enforce the new taxation regime. However, opposition to the move is growing rapidly and it is rather curious to see whether the new betting tax will be kept and for how long.
