KRA says Midiwo regulations ‘bad bet’ for economy

February 21, 2017
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Commissioner General John Njiraini told the National Assembly Labour and Social Welfare Committee that the Betting, Lotteries and Gaming Amendment Bill 2016 would go against the renewed efforts to increased revenue collection by KRA/COURTESY

NAIROBI, Kenya, Feb 21 – The Kenya Revenue Authority (KRA) on Tuesday cautioned parliamentarians against attempts to regulate betting and gaming activities in the country.

Commissioner General John Njiraini told the National Assembly Labour and Social Welfare Committee that the Betting, Lotteries and Gaming Amendment Bill 2016 would go against the renewed efforts to increased revenue collection by KRA.

Minority Deputy Leader Jakoyo Midiwo (Gem) is sponsoring proposed legislation that seeks to increase taxes on gambling activities.

The taxman said excessive tax rates would have the impact of driving investors in the service across the borders leading to huge losses for Kenya.

“If the Bill is passed as it is, the immediate impact will be an increase in exchequer revenues but this benefit may be short-lived depending on the elasticity of demand of service. Our experience indicates high tax rates lead to reduced demand,” said Njiraini when he appeared before the House team.

Njiraini told the committee that it was not practical to restrict online betting and there was no justifiable basis to prevent non-Kenyans from participation as this would negatively impact revenue collection.

The Commissioner-General noted with concern that a complicated tax regime as well as heavy taxing were key drivers of tax evasion, abuse of tax exemptions and corruption resulting from tax disputes.

“In our opinion, it is very difficult to control view e-commerce and it is a global problem. Our view is that this Proposal may be difficult to implement especially online betting since electronic platform outside the country and may not easy to control participation of Kenyans,” Njiraini stated.

He said revenue from the sector has been growing enormously and increasing taxes or trying to regulate betting activities will result in a dip in KRA’s earnings.

KRA has collected a total of Sh4.7 billion from gambling activities since 2014 and it is expecting to collect Sh3.4 billion in the current financial year.

According to KRA, revenue from the sector tripled between 2015 /2016 from Sh1.2 billion to Sh3.3 billion.

“The KRA Domestic Taxes data base has eight major players in the betting sector with a total revenue paid and payable amounting to Sh4.7b for 2014/15,2015/16 and part of 2016/17,”said Njiraini.

Njiraini said KRA was further in consultations with mobile phone service providers and the Communications Authority to be able to access third parties’ information and seal loopholes of revenue leakage.

The tax agency further urged Kenyans to view gambling and betting like any other business endeavours that need not to be punished by slapping high taxes on the players.

“The philosophy for taxing betting, lotteries and gaming revenues is partly to discourage gambling while also creating avenues for raising revenue. The application of this principle nevertheless requires moderation to ensure business continues to operate and thrive,” Njiraini explained.

KRA recommended a study to look into aspects of regulations and the social perspective of gambling and betting.

“KRA recommends the commissioning of a comprehensive study to determine the most appropriate regulatory and tax structure in respect of this industry that will balance between social, revenue collection and investment priorities,” said Njiraini.

The Betting, Lotteries and Gaming Amendment Bill 2016 introduces Betting Tax chargeable at 15 per cent of the gaming revenue, Lottery Tax chargeable at 20 per cent of lottery turnover, Gaming Tax at 20 per cent of Gaming Revenue and Prize Competition Tax at 20 per cent of the total turnover.

The Bill further introduces a new tax called Winning Tax which is to be charged at the rate 20 per cent of a person’s winning from gaming, betting or participating in a lottery or prize competition authorized under the Act.

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