Why the reduction of betting taxes is a win-win for all stakeholders

Kenya recently announced a significant reduction in betting taxes, with the excise tax on stake dropping from 15% to 5%, and the withholding tax on winnings lowered from 20% to 5%.

At their previous rates, these two taxes had been major subjects of controversy, with numerous industry stakeholders, particularly bettors and betting operators kicking against the charges.

Kenyan bettors generally felt that the Kenya Revenue Authority was being unfair on them with the twin taxes, as the excise tax reduced the actual amount of money that was wagered, and the withholding tax took out a decent chunk of their winnings.

Kenya has a long relationship with betting taxes. In fact, the East African nation has some of the most challenging betting laws in sub-saharan Africa as the government battles to curb the spiralling rate of gambling.

 At the same time, Kenyan authorities also recognise the potential for revenue generation from the betting industry, and are keen to eke out the most revenue from companies working in the country.

For the best part of a decade, the government has been attempting to find that balance between exerting control over gambling rates and extracting the most revenue from the booming industry.

It is safe to say that they haven't really got it right. While Kenya's tough gambling laws have forced out some global heavyweights like Betway, the overall number of active betting companies in the country continues to grow.

According to the Betting Control and Licensing Board, the body responsible for overseeing betting activities in Kenya, there are now over 200 legal gambling operators in the country.

Also, Kenya continues to churn out eye-watering numbers, with bettors spending hundreds of millions of shillings on betting on a yearly basis.

From all indications, except sports betting is criminalised, and people start being jailed for taking part in the activities (which is highly unlikely to happen), the government seems to be fighting a losing battle.

Hence, it was only a matter of time before the government reached a compromise and softened its stance against bettors. That has now come in the shape of the reduction in betting taxes.

Ideally, bettors would want the entire taxes wiped out, but the lowering of the rates to 5% is a big win for the punters and betting sites.

The previous rates had driven bettors away from licensed bookmakers, with many searching out betting sites with no tax. Leading betting affiliate, My Betting Sites Kenya, a site that compares betting companies in Kenya, claim that their pages have got nearly 10,000 Google impressions for searches about tax-free betting sites within the last three months.

Hence, by charging very high tax rates, the government would only force bettors to seek alternative illegal means which are harmful to both parties.

While there are no legal betting sites with no tax, there are unlicensed offshore sites that have managed to escape the net of Kenyan regulations. When Kenyans patronise these sites, their safety becomes at risk, while the Kenyan government also loses potential revenue to these bookies.

Lowering the taxes would hopefully bring people back to licensed bookies, which would be a win-win situation for everyone. Bettors can gain more reward from their wagers, betting operators gain more customers, and the regulators and administrators reclaim revenue previously lost to offshore bookies.

Rather than try to force down the gambling rates by charging high taxes, the government needs to take an educational and informational approach, and encourage the bettors and betting operators on the need for responsible gambling.