Kenya goes after ‘elusive’ trillion-dollar gambling tax

By Steve UMIDHA

Each year, Kenyan punters lose hundreds of billions of Shillings to the gambling industry, underlining the money-spinning national love affair that has grown popular among males aged between 25 and 34 years.

In fact, the most recent data by US research firm Geopoll, conducted in 2019, found that out of those aged 18 years and above, 57 percent have participated in gambling in the past, including 69 percent who were males while 44 percent were females.

Of those who gamble, the report, undertaken in partnership with a Paris-based multinational market research and consulting firm Ipsos, found that 47 percent are ‘light’ gamblers who place bets at least once a month or less, and only 10 percent of gamblers place bets more than once each day.

Yet, despite the regulations put in place by the industry regulator, Kenya Betting Control Board (BCLB), these operators have somewhat escaped scrutiny and are not rendering unto Caesar the corresponding shares that are Caesar’s.

So much so that President William Ruto on Wednesday accused online betting companies for operating in a space that is opaque.

“I am happy that the governor is bringing our online betting companies into the regulation space because we also want them to pay taxes. They are operating in an opaque space,” Ruto offered during a joint presser with Safaricom, KCB, and NCBA Chief executives, directing the Central Bank governor to moderate such companies to pay their share of taxes.

Ruto’s remarks is set to open a can of worms on the thorny debate touching on the exact amount sports betting companies such as Betika, Sportpesa, Mozart bet and others remit to the Kenya Revenue Authority (KRA).

There have been concerns that most of such companies are not declaring ‘accurate’ or ‘honest’ amounts to the exchequer, commensurate to what they actually raise in returns.

From brain hacks to dark nudges and near misses – betting companies have over the years employed an arsenal of clever tricks to tempt punters into spending more money – and a good number have willingly taken the bait – a practice that fast gained prominence in around 2014 when the market leader in sports betting, SportPesa launched in Kenya.

The 2019 Geopoll study finds that gambling is most popular among males aged 25-34, of whom 77 percent have gambled in the past, with 58 percent of this group gambling at least once a week. Females aged over 35 years are the least likely participants in gambling. Only 46 percent of this population have ever gambled.

Of those who have not gambled in the past, 39 percent report that they are not interested, and 27 percent state a lack of money prevents them from gambling.

Those aged 25-34 who do not participate in gambling are most likely to report that this is because of either a lack of money or the fear of losing money – 48 percent of these participants cited a money-based reason for not gambling, compared to 36 percent of those over 35 years and 31 percent of those aged 18-24, suggesting that this group is interested in gambling but feels a responsibility to not spend their money on gambling.

Caesar’s cut

Betting tax is charged at the rate of 15 percent of the revenue generated from betting. The betting and gaming companies were required to deduct 20 percent tax from the winnings of the punters and remit this to the KRA.

Safaricom, the East African Breweries Limited (EABL) and a host of manufacturing companies as well as betting firms contribute a chunk of what KRA takes home, pocketing billions in taxes.

The list of betting firms licensed for the year ending June published by the Betting and Licensing Control Board (BCLB) shows the number had increased to 100 from 76 in a similar period a year earlier—reflecting a 31.5 percent growth.

Kenya last year reintroduced excise duty on betting stakes to 7.5 percent, which means the government first takes Sh7.50 for every Sh100 a gambler places as a bet irrespective of winnings.

It also takes 20 percent on winnings and levies additional taxes on the betting firms in efforts meant to make gambling unattractive.

But investors in the betting space have been undeterred by the government’s attempts to curb the business through higher taxation and tighter regulation.

BCLB believes that the majority of the 24 new firms are owned by locals.

Details 

GeoPoll also confirmed that mobile phones have been at the forefront of the gambling industry in Kenya.

There are stark differences in gambling prevalence among smartphone owners vs non-smartphone owners, with just 40% of those owning basic phones gambling, compared to 64% of smartphone owners. Females who own a basic mobile phone are the least likely to have gambled, with only 27% of this group placing bets or gambling.

In addition, among those who have gambled, mobile applications are by far the most popular medium for doing so; 88% of gamblers have used their mobile device to place bets, and 55% of those are gambling on their phone once a week or more.

This makes mobile-based gambling both the most popular and the most frequently used method of gambling, demonstrating how the ease of access to mobile gambling has changed the betting industry dramatically.

Casinos are less popular, with only 36% of gamblers reporting that they place bets in casinos, and a third of those who go to casinos stating that they do so once a month or less.

Cyber cafes and betting shops are also less frequently used for betting than mobile, with only 28% and 33% of the gambling population respectively noting that they place bets through these shops.

Gamblers in Kenya are most likely to bet by themselves, with 40% noting that they place bets alone most often, however 38% bet with friends, demonstrating that even with the popularity of mobile apps betting can be a social sport.

In terms of what people in Kenya are betting on, football is the most popular type of betting – 83% report that they bet on football most often, followed by lotteries which 11% report is their most common form of betting. Lotteries are most popular with the older age group, 22% of which say lotteries are their preferred type of gambling, and females are also more likely to bet through lotteries than males.