20pc tax cuts growth in Kenya’s gambling industry by almost half

By: LILIAN OCHIENG

A 20 per cent withholding tax slapped on the thriving gambling sector last year has cut down the industry’s growth by close to a half.

PricewaterhouseCoopers report ‘Taking the Odds’ gambling outlook for 2015 – 2019 states that Casino gambling revenues in Kenya rose only by 6.9 per cent last year down from an 11.2 per cent increase experienced in 2013.

Revenue from the sector has previously experienced fast growth with the compound annual increase between 2009 and 2011 amounting to 24.2 per cent.

PwC forecasts in the next five years, growth will remain relatively stable.

In addition to the 20 per cent levy, increasing competition from illegal online gambling and from a new national lottery may also have contributed to the slowdown for the 13 licensed casinos, said Pietro Calicchio Gambling industry leader for PwC South Africa.

The law on withholding tax came into effect on January 1, 2014.

It was introduced to the Income Tax Act in amendments to the Finance Act 2013.

Under the new law, every cent a Kenyan wins in lotteries, gambling or raffles is taxable at the rate of 20 per cent.

PwC in its 2013 gambling report noted that the law would have dampening effect on gambling.

The sentiments were largely supported by industry stakeholders as it came into effect.

LOSE CUSTOMERS

Nairobi’s thriving Mayfair Casino and Club chairman, Ludovico Gnecchi Ruscone, was quoted by Nation saying that trying to implement the tax at any of the firm’s casinos would be absurd, and that the associated logistics would see the industry lose all customers.

The High Court in March last year dismissed a petition by casino owners to do away with the withholding tax legislation.

The businessmen had complained that the legislation would expose them to double taxation by the county and national government.

Kenya’s gambling business is regulated by the Betting Control and Licensing Board (BCLB), which issues firms with permits to run public lotteries and validates the selection of winners in competitions.

According to PwC’s Mr Calicchio the days that lie ahead are tougher for this industry in Kenya.

This is because the local vibrancy in mobile gadgets is likely to bring in great competition to the operational casinos as most consumers adopt to mobile gambling, slowing down revenues of local casinos.

HARSH

The survey is conducted on three countries; Kenya, Nigeria and South Africa, it notes that the gaming industry will generally grow despite the harsh conditions.

In the three market regions as a whole, gross casino gambling revenues will total an estimated S42 billion in 2019, a 2 per cent compound annual increase on the S28 billion earned in 2014, states the PwC report.

SOURCE: DAILY NATION